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TMI Blog2024 (4) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Ltd (hereinafter "M/s. Marigold"). According to the AO, he has received information from the DDIT (Inv.) Unit, Kolkata, Ahmedabad & Mumbai that the scrip of M/s. Marigold was one among the eighty four (84) penny-stocks; and AO noted the modus-operandi of unscrupulous entry providers facilitating bogus capital gain/loss for beneficiaries which he discussed at para no. 6.1 to 6.6 (page no. 2 of assessment order). Thereafter, he discussed about the sale of shares of M/s. Marigold/Greencrest and claim of LTCG from para no. 7 onwards (page no. 2 onwards of assessment order) wherein he noted the financials of M/s. Greencrest as well as the price movement of shares in graph/chart form (refer para 7.3.1 page 6 to 15); and then AO was of the opinion that unusual price movements depicts the price rigging resorted by the entry providers in active connivance with pre-arranged exit providers. The AO took note of the rise in closing price, and with the help of a graph has given the date-wise price, and volume of trade of this scrip from page no. 3 of the assessment order and noted that, the market price of share which was around Rs. 7.66 [for a share in April 2012], was jacked up to Rs. 164. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok note of the report of investigation wing (Kolkata) wherein the details of search conducted by the investigation wing on various entry operators/brokers were stated; and they had admitted of providing bogus LTCG/loss on sale of penny stocks. Thus, according to AO, the penny stocks were identified and even the cash-trails were exposed. The report according to AO also contained the statements of entry operators who admitted of doing the wrong act of providing bogus LTCG, by rigging the prices in the stock-exchange. And that exit providers didn't reply to his notices. And assessee failed to give the name of advisors who advised her to buy the share of M/s. Marigold. Thereafter, the AO concluded that the entire LTCG claim of assessee was bogus, and such an act was resorted to by assessee for converting her black-money to white. Thereafter, at para no. 14.1 at page no. 27 of assessment order, he discussed the mode of acquisition of shares of M/s. Marigold by the assessee and the sale of shares of M/s. Greencrest and noted the unusual rise in the price when it was sold. Thereafter, he noted that the assessee had failed to show that she had any knowledge about share trading and have inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 20.11.2012 to 31.03.2016, of HDFC Bank Ltd National Securities Depository Ltd]. A perusal of the statement of Demat Account shows credit of ten thousand shares to the demat account of the depository participant as on 18.12.2012 (refer page no.2 of Transaction statement). Thereafter, there was a split of shares, and by virtue of it 10,000 shares became One Lakh shares, which was credited on 07 june 2014 which fact is evident from perusal of page 2 of Demat Transaction statement; and it is noted that the AO/Ld. CIT(A) has not disputed the same and assessee has given copies of demat statement reflecting the holding of shares of M/s. Marigold (later known as M/s. Greencrest). And after holding the shares for more than 2.5 years, the assessee sold One Lakh shares in Bombay Stock Exchange (BSE) from 06.08.2014 to 04.09.2014 (refer 2-3 of demat transaction statement) and received total sale consideration of Rs. 62,02,308/-; and the assessee claimed LTCG of Rs. 61,02,308/- which assessee claimed as exempt u/s 10(38) of the Act. 5. Thus, we note that the assessee has submitted the primary documents to prove purchase/allotment of shares of M/s. Marigold i.e share certificate (page 87 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns and not doing any real business, but only providing accommodation entries. The AO issued notice u/s 133(6) of the Act to these exit providers and according to him, "in most of the cases no reply was received". Further, according to AO, out of these seventeen (17) exit providers, three (3) i.e. (i) M/s. Spark Commodeal Pvt. Ltd, (ii) M/s. Manner Distributors Pvt. Ltd & (iii) M/s. Luminous Tie UP Pvt. Ltd. were known Jamakharchi companies. Thereafter, he concluded that the purchase and sale of share of M/s. Marigold (now known as M/s. Greencrest Financial Services Ltd) was nothing but accommodation entry provided to the assessee for converting her unaccounted income. And therefore, the AO added the entire sale consideration of Rs. 62,02,308/- u/s 68 of the Act. On appeal, the Ld. CIT(A) has confirmed the addition even though the assessee pleaded before him (i) that she has discharged her burden to prove the allotment/purchase and sale of the shares of M/s. Marigold (now known as M/s. Greencrest Financial Services Ltd). (ii) And that the shares were demated and (iii) that both considerations (i.e. share purchase & sale consideration) have passed through banking channel and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order. According to Ld. AR, unless the AO is able to point out from the investigation report/statement of stock brokers/entry operators and spell out the role of assessee/broker as a wrong-doer or participant in the racket (as stated in the report of investigation wing) the impugned action of AO/Ld. CIT(A), in the light of the un-impeached primary documents has to fail. 8. We find that AO during the assessment proceedings has asked the assessee to prove the claim of LTCG of Rs. 61,02,308/- from sale of shares of M/s. Greencrest (earlier known as M/s. Marigold). And pursuant to such a direction, the assessee had filed the primary documents as discussed at para 4 to 5 (supra) to prove the purchase of shares of M/s.Marigold (now known as M/s. Greencrest Financial Services Ltd) and the same is not repeated for sake of brevity. Thus, we find that assessee had filed primary documents found placed at page 86 to 102 of the PB, which shows that assessee had applied/allotted the shares of M/s. Marigold (later known as M/s. Greencrest Financial Services Ltd on 21.02.2012 and sold the shares of M/s. Greencrest (between 06th Aug, 2014 to 04th Sep, 2014.) through Bombay Stock Excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of modus-operandi to do any illegal acts. As noted, the AO has been influenced by the investigation report submitted by the Investigation Wing of Department functioning at Kolkata. It is true that some unscrupulous entry operators had devised methods/modus-operandi to beneficiaries to facilitate laundering their black money to white through pre-planned receipt in the form of bogus LTCG, loan etc. But from perusal of the discussion of AO, we find it to be general in nature and there is nothing in the discussion to link/connect the assessee somehow with the modus-operandi of the Investigation Wing or Report. Since there is neither any evidence/material to incriminate the assessee in the investigation report nor any material to suggest assessee/broker being part of the nefarious conspiracy or abetment, such a report of investigation wing cannot be of any aid to the revenue and thus AO/Ld CIT(A) erred in placing reliance on such report to draw adverse inference against assessee. 9. The Ld. AR has brought to our notice that similar case came up before this Tribunal (LTCG claim on sale of shares of M/s. Marigold) wherein Tribunal in the case of Shri Yogesh P. Thakkar (ITA. No.1612/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the increase in their shares prices. Therefore, the AO concluded that certain operators and brokers devised a scheme to accommodate the unaccounted monies of the assessee in guise of capital gains. The AO accordingly added the capital gains derived by the assessee under Section 68 of the Act. On appeal, the Hon'ble jurisdictional High Court upheld the Tribunal order deleting the addition, by observing as under: "..It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs." 12. We may also gainfully refer to the decision rendered by this Tribunal in the case of DCIT Vs Mukesh R Marolia (6 SOT 247) wherein on similar facts and circumstances the addition made by the AO on account of purported bogus LTCG derived on sale of listed shares was deleted by observing as under: "10. We heard both sides in detail and perused rival contentions in the light of the records of the case and the paper book filed by the assessee. In the return of income filed by the assessee for the year under appeal, the purchase of flat at Colaba for a consideration of Rs. 2,06,72,904 was reflected. The assessee's contribution in the purchase of the flat was @ 70 per cent for which the investment amounted to Rs. 1,44,71,033. The source of investment was, among other things, the sale proceeds of shares of Rs. 1,41,08,484. This amount has been questioned by the revenue authorities. 10.1 The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions. 10.4 When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous year period relevant to the assessment years 1999- 2000 and 2000-01 have grown into a very sizable amount ultimately yielding a fabulous sum of Rs. 1,41,08,484 which was used by the assessee for the purchase of the flat at Colaba. The sequence of the events and ultimate realization of money is quite amazing. That itself is a provocation for the Assessing Officer to jump into a conclusion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. 13. The statement of Pradeep Kumar Daga that the transactions with the Haldiram group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On a perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought to our notice that the findings recorded by the Tribunal are contrary to the documentary evidence on record. 14. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price rigging in the market and therefore dismissed the appeal of the Revenue. relevant findingsThe of the Hon'ble High Court which is binding upon us, are as follows:- "2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against 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 judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd.1 but that does not help the revenue in as much as the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court in CIT v. Smt. Pooja Agarwal, [2018] 99 taxmann.com 451 (Raj.) wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue." 18. As far as the reliance the reliance placed by the Ld. CIT, DR on the decision of SEBI Vs Rakhi Trading Pvt Ltd (supra) is concerned, it is noted that the said decision was rendered in the context of synchronized trading conducted by the said assessee in the F&O Segment of the Stock Exchange and therefore the facts involved therein are clearly distinguishable from the facts of the present case. 19. Coming to the decision of Hon'ble Delhi High Court in the case of Suman Poddar vs ITO (112 taxmann.com 330) cited by the lower authorities, it is noted that the Hon'ble Delhi High Court in their later judgment in the case of Pr. CIT v. Smt. Krishna Devi (431 ITR 361) had considered the various proposition laid down in case of Suman Poddar (supra) and noted that the decision in that case was arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase was held to be in doubt. It was also found that the address of the listed shares purchased and the address of the stock broker was the same which was found to be peculiar and there was no response to the notices issued by the AO. We find that there are no such facts present in the appellant's case and therefore this judgment relied upon by the Revenue is also found to be factually distinguishable. 22. We have also perused the decisions of the coordinate Benches of the Tribunal cited by the Revenue but found that the facts involved therein to be factually distinguishable as well. For instance, in the case of ITO v. Shamim M Bharwani (supra), the addition was confirmed since the source of purchase of shares remained unproved. In the decided case, the assessee had claimed to have purchased the shares in cash but was unable to provide the necessary trail. The Tribunal also noted the assessee to be an inactive investor having meagre investment portfolio and therefore doubted the genuineness of the purchase of such unknown shares in cash. In the present case however, both the lower authorities have not doubted the contemporaneous evidences furnished by the appellant in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 28.06.2019 was pleased to delete similar addition on account of alleged bogus LTCG made by the AO in relation to sale of shares of TTL by the assessee by holding as under: - "17. That on going through the aforesaid judgment, we find that no question of law was formulated by Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine and the Hon'ble High Court found that the issue involved is a question of fact. Thus, the judgment of the Hon'ble High Court has to be seen if similar facts are permeating in the present appeal also and if there is difference on facts, then the judgment cannot be applied. In the judgment of Hon'ble Apex Court in Kunhayyammed vs State of Kerala reported in 245 ITR 360 and also in CIT vs. Rashtradoot (HUF) reported in 412 ITR 17, the Hon'ble Apex Court have held that if the High Court has not admitted the question of law, and has dismissed the appeal, then it is a case of dismissal in liminie. Even on merits and facts, the judgment of Udit Kalra vs ITO (supra) is distinguishable as in that case the company was into consistent losses, whereas, the scrip in which assessee has dealt is a growing and high turnover compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 56,813/-. 20. As we find the transaction of long term capital gains of Rs. 1,93,56,813/- derived by the assessee as genuine and as such, further addition of Rs. 3,87,136/- made by the Assessing Officer on account of alleged commission is consequential and is also liable to be deleted and accordingly, the same is also hereby deleted." 26. We also gainfully refer to the decision of the coordinate Benches at Jaipur and Delhi in the cases of DCIT Vs. Shri Ghanshyam Agarwal (ITA. No.532/JP/2019) and Jyoti Gupta Vs. ITO (ITA No. 3510/Del/2018) respectively, wherein also similar addition on account of LTCG derived on sale of shares of TTL by relying on statements of Mr. Kayan / purported exit providers, was deleted by this Tribunal. The relevant findings rendered by this Tribunal in both cases are taken note of as under:- (A) DCIT Vs. Shri Ghanshyam Agarwal (supra) "6. We have considered the rival submissions as well as the relevant material on record. The assessee purchased 20,000 shares of M/s. Trinity Tradelink Ltd. @ Rs. 10/- each for a total consideration of Rs. 2,00,000/-. The assessee has produced the share certificate of the shares whereby the shares were initially issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of the prevailing price of shares of M/s. Trinity Tradelink Ltd. at Stock Exchange in the years 2012, 2013 and 2014. However, it is pertinent to note that the assessee purchased the shares of M/s. Trinity Tradelink Ltd. which was not listed in the Stock Exchange in the year 2012 but only after amalgamation of the said company with M/s. Omnitech Petroleum Ltd. (formerly known as Sharp Trading & Finance Ltd.) as per the approval of amalgamation by the Hon'ble Bombay High Court vide decision dated 10th January, 2014, the amalgamated company shares got listed by virtue of amalgamation. At the time of amalgamation, M/s. Trinity Tradelink Ltd. amalgamated in M/s. Omnitech Petroleum Ltd. but subsequently the said company also changed its name to M/s. Trinity Tradelink Ltd., which has resulted this confusion of prevailing share price in the Stock Exchange in the years 2012 to 2014. Thus, we find that the said comparison of the AO of the prevailing price in the year 2012 with the price of the shares of amalgamated company in the year 2014 is misconceived. The AO has not conducted any independent enquiry or investigation to verify the genuineness of the transaction but has ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount wherein the payment is reflected cannot be manipulated by the assessee. Further, the shares were dematerialized and holding of the shares in the Demat Account is also independently verifiable and cannot be disputed in the absence of any contrary material to show that the Demat Account produced by the assessee itself is bogus. We further note that this is not a case of purchase of penny stock of a company and within a short period there is an unprecedented hike in the sale price of the shares, but in case the assessee purchased the shares of unlisted company which was subsequently amalgamated with a listed company and, therefore, the value of the amalgamated entity is certainly very higher than the value of share of unlisted company though there can be a question about the sweep ratio of the shares. However, the same has not been doubted by any authority and the scheme of amalgamation was duly approved by the Hon'ble High Court. Thus there is an extraordinary event in this case of amalgamation of unlisted company with a listed company and consequently there is a sudden increase in the price of the shares of amalgamated entity..." (B) Jyoti Gupta Vs. ITO (supra) "11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The relevant findings of the Hon'ble High Court are as follows :- "After detailed discussion, the ITAT has recorded the following findings of fact : "The above findings recorded by ld. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the ld. CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. The ld. CIT(A) relying on various orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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