9911796707
TMI Blog2024 (4) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... d statements of unrelated persons on basis of unfounded presumptions. On these given facts, the Hon'ble High Court upheld the order of lower authorities deleting the addition made in relation to LTCG derived on sale of shares.
Thus, we direct AO to delete the addition made u/s 68. And we direct the AO to allow the LTCG/exemption claimed by assessee u/s 10(38) - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... litated in selling them, through paper companies which took cash from assessee and purchased the shares by giving cheque, on which assessee shows earning of LTCG which are nothing but bogus. And that, statements of entry operators who controlled and managed these entry providers revealed that these entities (exit providers) are bogus/paper entities, which are not doing any real business and used only for providing accommodation entries. So according to AO purchases facilitated by exit providers were only accommodation entries. The AO at para 11 (page 17 to 20) has reproduced the statement of assessee recorded by him and noted that on advice of her husband, she has invested in shares of M/s. Marigold. But she doesn't know anything about the company M/s. Marigold i.e. she is unaware who is the managing director and persons who look after the affairs of the company. And she was unaware of the financial status or business activity of M/s. Marigold. And that she has purchased the shares from M/s. M/s. Octopus Infotel Pvt. Ltd, which according to AO was also a jamakharchi company. Thus, AO was not satisfied with the genuineness of the transaction. Thereafter, he issued show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad filed her return of income for AY. 2015-16 on 05.03.2016 declaring total income at Rs. 6,26,090/-. Later on, the case of the assessee was selected for scrutiny. The AO noted that the assessee had shown to have earned LTCG which was exempt u/s 10(38) of the Act to the tune of Rs. 61,02,308/-. Therefore, he directed the assessee to file the details of the LTCG claimed, wherein the assessee brought to the notice of the AO that she is a regular investor in shares; and on 24.02.2012, she purchased 10,000 shares of M/s. Marigold @ Rs. 10 per equity share from M/s. Octopus Infotel Pvt. Ltd by making payment of Rs. One Lakh in cheque (refer page 86 PB) and duly reflected this investment in her balance sheet as on 31.03.2012. Thereafter, the name of M/s. Marigold changed to M/s. Greencrest Financial Services Ltd and shares got split to Rs. 1/- per share. Accordingly, assessee got one lakh shares of M/s. Greencrest and filed relevant documents to prove the allotment of equity shares(copy of share certificates dated 18th July, 2012 placed at page no. 87 to 102 of PB). And also brought to the notice of the AO vide letter dated 10 October 2017 (refer page 44 PB Exhibit-B) that the shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; and it is not the case of AO that there is any infirmity/deficiencies in the relevant/primary documents filed by the assessee as noted (supra). Thus, we find that assessee has discharged her burden to prove the LTCG claim on sale of shares of M/s. Marigold (now known as M/s. Greencrest) and the AO has failed to rebut/produce contrary material/evidence to counter/question the veracity of the primary documents produced by assessee (supra) in order to dis-prove her claim. 6. The AO has disallowed the LTCG claim of assessee by mainly taking note of report submitted by Investigation Wing (Kolkata) as well as he doubted the financial prudence of the assessee to have purchased the shares of M/s. Marigold; and wondered as to how the price of shares of M/s. Marigold would have commanded a price of (approximately) Rs. 62.02 per share within a span of two years. And thereafter, the AO was of the opinion that the prices have been rigged and shares were traded only on 137 days and only 182 trades happened during that period; and according to him rigging of prices took place on different days; and thereafter he noted the name of seventeen (17) exit providers who according to him had purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act had proved the events of allotment/purchase of M/s. Marigold shares, dematerialization of shares, and thereafter shares were sold through Bombay Stock Exchange Electronic Platform. Therefore, according to Ld. AR, since assessee proved that she has fulfilled all conditions for making claim of LTCG/exemption u/s 10(38) of the Act, the same could not have been denied by AO without first finding any infirmity in the primary documents filed by assessee which in this case has been undisputed by AO. And it was pointed out by the Ld. AR that AO have not leveled any allegation/infirmity about the primary documents produced by the assessee to prove the purchase and sale of shares of M/s. Marigold. Further, according to Ld. AR, the AO/Ld. CIT(A) has not been able to show that cash transaction was there in the assessee's claim. According to Ld. AR, the AO erred in relying on the 3rd party statements without allowing assessee to cross-examine them. We note that AO failed to show from the purported material which he relies upon in the assessment order (like investigation report of the Investigation Wing of Department, Financials, statements of stock- brokers/entry operator, submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operandi as stated therein the investigation report of Kolkata or SEBI report, no adverse view is legally sustainable. We find that Kolkata Investigation Report discussed by AO at para 6 onwards nowhere alleges any wrongdoing of assessee or her brokers; and we have gone through the copy of the SEBI order dated 29th June 2022, wherein the SEBI conducted enquiry into the trading of shares of M/s. Greencrest Financial Services Ltd & role of its director Shri Sunil Parekh and Shri Aditya Parakh and some allottees (total proceedings against 18 persons/entities refer page no. 01 of SEBI order) wherein SEBI was concerned about transactions taking places during two patches (Patch-1 from May 10th, 2013 to June 04, 2014 and Patch-II from June 05th, 2014 to Dec 04th ,2014). After investigation, the SEBI didn't impose any penalty against the company M/s. Greencrest, and its two directors and another allottee Shri Ravindra Kumar Grover; and SEBI imposed penalty for 14 persons/entities (refer Page no. 45 to 47 of SEBI order). Thus, we find that there was no allegation/penalty imposed on assessee or her broker or even against the company M/s. Grencrest. Therefore, no adverse view can be drawn ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the plethora of judgments relied upon by both the parties and but only those judgments which are found to be relevant to the case in-hand, have been discussed in the ensuing paragraphs. 11. It is noted that the Ld. AR had rightly relied upon the judgment of the Hon'ble jurisdictional Bombay High Court in the case of Shyam R. Pawar (229 Taxman 256). In the decided case also, the assessee was purchasing and selling the shares through a broker in Mumbai, for purchase of shares of (i) M/s. Bolton Properties Ltd., (ii) M/s Prime Capital and (iii) M/s. Mantra; and he has transacted through the broker at Calcutta and two operators namely Mr. Sushil Purohit and Shri Jagdish Purohit, and one of them was the Director of M/s. Bolton Properties Ltd. who had purportedly admitted to have manipulated the share price of M/s. Bolton Properties Ltd. Mr. Jagdish also reportedly floated several investment companies which were aggressively used in the entire deal with the broker M/s. Prakash Nahata & Co. According to AO, the shares offloaded by the beneficiaries through M/s. Prakash Nahata & Co., were ultimately purchased by the investment companies controlled by Shri Purohit. The name of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee by way of agricultural income was much higher than the investment made by the assessee in the purchase of shares as on 31-3-1999. After making the investments in the shares, the assessee had a surplus cash balance of Rs. 3,09,000 as on 1-4-1999. Thereafter, the assessee has further returned an agricultural income of Rs. 66,000 for the assessment year 2000-01. The amount invested in the purchase of shares in the year ending on 31-3-2000 was Rs. 2,57,020. Again the assessee had a cash balance thereof of Rs. 1,18,771. Therefore, it is, very clear that the investment made by the assessee in shares during the previous periods relevant to the assessment years 1999- 2000 and 2000-01 was supported by cash generated out of agricultural income. The above agricultural income have been considered in the respective assessments. Therefore, the contention of the assessing authority that the assessee had no sufficient resourcefulness to make investments in the shares is unfounded. 10.3 Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of Shri Mangesh Chokshi, Director of M/s. Richmond Securities Pvt. Ltd. Those two persons have categorically admitted before the assessing authority that they had dealings with the assessee in respect of the share transactions. They have confirmed the transactions stated by the assessee that he had with them. These positive statements made before the assessing authority supported the case of the assessee. There is no force in the action of the assessing authority in relying on the negative statements of the other parties whose role during the relevant period was either irrelevant or insignificant. Therefore, in the facts and circumstances of the case, it is, our considered view that certain statements relied on by the assessing authority do not dilute the probative value of the statements given by other persons in favour of the assessee confirming the share transactions entered into by the assessee. 10.6 The above circumstances have made out a clear case in support of the book entries reflecting the purchase and sale of shares and ultimately supporting the money received on sale of shares and finally investing the same in the purchase of flat. The chain of transactions entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into share transactions. Atleast such an inference is not possible in law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee." 13. On further appeal, it is noted that the Hon'ble Bombay High Court in their order in ITA No. 456 of 2007 dated 07-09-2011 has affirmed the order of this Tribunal. 14. The Ld. AR of the appellant has rightly relied on another judgment of the Hon'ble Bombay High Court in the case of CIT Vs Jamna Devi Agarwal (328 ITR 656). In the decided case, also the Revenue had disputed the genuineness of the long-term capital gains derived by the assessee on sale of shares of listed companies for similar reasons as cited in the present case. On appeal, the Hon'ble High Court upheld the decision of this Tribunal deleting the additions by observing as under: "12. From the documents produced before us, which were also in the possession of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts. 16. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on findings of fact. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs." 15. The Ld .AR also brought to our notice therecent judgment rendered by the Hon' High Court inble jurisdictional Bombay the case of PCIT v .Ziauddin A Siddique (ITA No .2012 of 2017) dated 04.03.2022 which is found to be relevant in the facts involved in the present case .In the decided case ,the issue before the Hon'ble High s right in law in deleting theCourt was whether this Tribunal wa addition made u/ s68 of the ACT in relation to LTCG derived on sale of shares, ignoring the fact that the shares were purchased from off- market sources and that the sharp rise in prices were not supported by financials. ring the question raised by the Revenue in theAnswe negative, the Hon'ble High Court held that there was a finding of fact that the purchase& sale of shares occured on the platform of stock exchange, upon payment of STT and were suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rs. 7593444/- by holding the transaction as genuine because transaction is through Stock Exchange and payment is by cheque, completely ignoring the fact that such masquerade is used methodically to provide accommodation entries in order to show the sham transaction as genuine? (III) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in deleting the addition of Rs. 151869/- being commission paid to acquire such accommodation entry? (IV) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in rejecting the Revenue's appeal without considering the case on merit where the additions were made by the AO on the basis of corroborative information received from Investigation Wing, Kolkata given that the case fails under exception as per para 10(e) of CBDT circular no. 03/2018 dated 20-08-2018. 17. The Hon'ble High Court is noted to have answered the above s against the Revenue by following their earlier judgmentquestion rendered in the case ofCIT v. Smt. Pooja Agarwal, [2018] 99 taxmann.com 451, by observing as under :- "..Learned ITAT has specifically held that the assessee has pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court are as follows :- "12...Lastly, reliance placed by the Revenue on Suman Poddar v .ITO (supra )and Sumati Dayal v .CIT (supra )is of no assistance .Upon examining the judgment of Suman Poddar (supra )at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case .On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him .However, this is quite different from the factual matrix at hand .Similarly, the case of Sumati Dayal v .CIT (supra )too turns on its own specific facts .The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue". 20. We thus note that the later judgment of Hon'ble Delhi High Court in the case of Krishna Devi (supra) is relevant to the facts of the present case, whereas the decision of Suman Poddar (supra) cited by the Revenue, is found to be factually distinguishable in light of the facts involved in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are found to be distinguishable. 24. Apart from the above, the Revenue has also relied upon several judgments rendered in the context of the genuineness of share subscription monies raised by closely held companies, which were held to be in the nature of unexplained cash credit u/s 68 of the Act by the judicial forums. Having perused those judgments, it is noted that, the question as to whether the assessee had satisfied the three ingredients set out in Section 68 of the Act is essentially a fact finding exercise. We note that the facts involved in each of them was qua share application monies whose facts & features were distinguishable to the issue involved in present case i.e. genuineness of capital gains derived on sale of shares. Since these judgments were noted to be not relevant to the present case, we do not deem it fit to discuss each of them separately. 25. We, instead, gainfully refer to the decisions cited by the Ld. AR, rendered by the coordinate Benches of this Tribunal wherein also, on similar facts and circumstances, following the above referred judgments of the jurisdictional High Court, this Tribunal deleted the addition/s made by the AO u/s 68 of the Act in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances, we find that the transaction of the assessee of deriving long term capital gains of Rs. 1,93,56,813/- by selling shares of M/s Trinity Tradelink Ltd. was treated as bogus by the Revenue only on the basis of suspicion and probability and without finding any defect in the various documentary evidences filed by the assessee and further, the finding recorded by ld CIT (A) on page 26 of his order that the addition has been made on independent analysis of the documents, is contrary to material available on record. As on perusal of the order of assessment, we find that no independent inquiry was made with regards to alleged entry operator Sh. Vikrant Kayan. Whereas, the sole basis of making the impugned addition was statement of Sh. Vikrant Kayan, which too was recorded behind the back of assessee by DIT (Inv) Kolkata and the statement alone cannot be the conclusive evidence to nail the assessee and hence needs to be excluded for consideration as the said person has not been allowed cross examination by assessee, even though various requests were made by assessee. As such, the transaction of the assessee was duly supported by relevant documentary evidences without there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has made the payment of purchase consideration through banking channel on 31st October, 2012. Once the payment of consideration is not in dispute and shares were transferred in the name of the assessee as reflected in the Demat Account of the assessee, then the assessee has established the purchase of the shares and holding in the Demat Account since 31st October, 2012. The assessee is having Demat Account with IDBI Bank and on perusal of the Demat Account it revealed that the assessee has been a regular trader/investor in the shares of various companies including various public sector undertakings. Thus it is not an isolated transaction but it is one of the hundreds of transactions in the Demat Account of the assessee. Out of these 20,000 shares, the assessee has sold 15,500 shares after one year whereas the balance 4500 shares were sold prior to one year and offered short term capital gain to tax which has not been disputed by the AO. Thus out of a lot of 20,000 shares of M/s. Trinity Tradelink Ltd., the shares sold by the assessee prior to one year were not disputed by the AO as the short term capital gain was offered to tax by the assessee. The AO has disputed the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rima facie relates to the company after the amalgamation and change of name which is a listed company whereas the assessee has purchased the shares of an unlisted company, namely M/s. Trinity Tradelink Ltd. Further, the question no. 8 was very specific and in answer to the said question, Shri Vikrant Kayan has stated as reproduced by the AO at page 8 of the assessment order as under :- "Q.8. Please tell the name of the parties to whom you have provided bogus billing? Ans. Sir, I have provided accommodation entry in the form of bogus billing to many companies, some of them are Binani Cement Ltd., Binani Zinc Ltd., Merit Plaza Pvt. Ltd., Vansudhara Infra Developers Pvt. Ltd., Swis Mercantile Pvt. Ltd., Consumer Marketing India Pvt. Ltd., PAESS Industrial Engineers Ltd., Darashaw & Co. Pvt. Ltd. and Voltas Ltd." Thus in response to the question to tell the names of the parties to whom he provided bogus billing, he replied the names of various parties and, therefore, there is no allegation against the assessee or the assessee's partnership firm by Shri Vikrant Kayan. The AO based on the report of investigation and the statement has treated the transaction as bogus w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request was made by the assessee for allowing cross examination was denied by the Assessing Officer. The first appellate authority also did not consider it fit to allow cross-examination. This is in gross violation of the principles of natural justice and against the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT Civil Appeal No. 4228 OF 2006… 14. Considering the facts of the case in totality, I do not find any merit in the impugned additions. The findings of the CIT(A) are accordingly set aside. The Assessing Officer is directed to allow the claim of exemption u/s 10(38) of the Act." 27. We also rely on the decision of the Hon'ble Allahabad High Court in the case of Pr.CIT Vs Renu Agarwal (153 taxmann.com 578. In the decided case also the AO had disallowed exemption claimed by assessee under section 10(38) and made additions to income of assessee on ground that assessee was involved in purchase & sale of shares which were being misused for providing bogus accommodation of LTCG. On appeal, the Hon'ble High Court noted that the lower appellate authorities had extensively examined the facts of the case and taken note of the material f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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