9911796707
TMI Blog2025 (3) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... preciating the fact that as per investigation done by income tax Department (Inv), Kolkata dated 27.04.2015, the name of the assessee featured in the list of the persons who have availed bogus LTCG and exemption u/s. 10(38) of the Income Tax Act. ii) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate the ground realities that the documents in the case of shell companies are always in order so that they can act as a conduit in aiding tax evasion. iii) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to appreciate that documents are manufactured to give genuineness to the otherwise coloured transaction aiding in tax evasion. iv) On the facts and circumstances of the case & Law, the Ld. CIT(A) failed to appreciate the fact of layered transaction of purchase and sale of shares which clearly depicted that the LTCG of the assessee is a sham transaction, clearly explained by AO from Para 7.1 to 11.2. v) On the facts and circumstances of the case & in law, the Ld. CIT(A) failed to enumerate while giving relief that how the facts of the case relied upon are similar to facts of the case of the assessee. vi) On the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case & in law, the Ld. CIT(A) failed to appreciate that even if documentary evidence is produced, the same must pass the test of human probabilities and surrounding circumstances if they do not, then the claim so made fails. xvi) On the facts and circumstances of the case & in law, the Ld. CIT(A)erred in deleting the addition of Rs. ,84,35,115/- made by the AO on sale proceeds of the share u/s. 68 of the I.T. Act, without appreciating the fact that the assessee has failed to establish the financial and operation of the company to prove the enormous rise in share value and thereby the genuineness of the transactions to the satisfaction of the AO, thereby ignoring the Apex Court decision in the case Pavankumar M. Sanghavi Vs. Income-tax Officer (Special leave to appeal (C) No(s) 10250 of 2018 and NRA Iron & Steel Pvt. Ltd. (SLP (Civil) No. 29855 of 2018) dated 5th March, 2019 on same facts. xvii) On the facts and circumstances of the case & in law, the Ld. CIT(A) has failed to apply the ratio of decision of Tribunals & Hon'ble Courts including jurisdictional High Courts in favour of revenue while giving relief to the assessee, elaborated upon by AO in its asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the addition of Rs. 15,75,789/- on account of disallowance u/s. 14A, failing to appreciate the fact that the assessee has failed to prove that investments has been made not out of borrowed fund when the accounts are tangible and not separate accounts for investments are maintained. xxv) Any other question of law and fact to be raised at the time of appeal. xxvi) It is humbly prayed to set aside the order of the CIT(A) and restore the order of the assessing officer" 3. Fact in Brief :- The facts, as culled out from the impugned order passed by the learned CIT(A) are that, on 14/01/2015, the assessee filed its return of income electronically declaring net taxable income at Rs. 32,63,962. The assessee had purchased 4,22,500 shares on 16/03/2012, physically at the rate of Rs. 10 per share and the same were duly reflected in the books of account of the assessee as well as shown in Balance Sheet as investment during the assessment year 2012-13. The aforesaid shares were sold during the during the assessment year 2014-15. The period of holding of the shares is more than twelve months. The cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 17,07,742, has been paid. The assessee received dividend amounting to Rs. 48,899, which was claimed exempt under section 10(34) of the Act and claimed expenditure at Rs. 15,75,789, in the return of income. The Assessing Officer has made disallowance under section 14A at Rs. 15,75,789, though the assessee is not liable for the same. Being aggrieved the assessee preferred appeal before the first appellate authority. 6. During the proceedings before the learned CIT(A), the assessee made a detailed submission which was recorded by the learned CIT(A) in its impugned order vide Page-4 to 14, is also reproduced below for ready reference:- "5. The Authorised Representative of the assessee has made the following written submission: The assessee has e-filed return of income on 14/01/2015 declaring net taxable income at Rs. 32,63,962/-. In the return of income assessee has shown income from Salary, income from house property, income from business and income from other sources. The assessee has also shown income from exempt capital gains from transfer of equity shares. The assessee has purchased 422500 shares of Swift IT Infrastructure and Services Ltd. by cheque on 16/03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of a massive investigation was carried out by Pr. Director of Income Tax (Investigation), Kolkatta in the cases where the provisions of section 10(38) were being misused by the beneficiaries of bogus long term capital gain and to avoid paying taxes and have also been forwarded the details of transactions entered into by the assessee. The learned assessing officer has not any provided the details forwarded by Investigation Wing, Kolkatta as well as statement of persons, whose statement were recorded during the course of investigation made by the Pr. Director of Income Tax (Investigation), Kolkatta. Even the learned assessing officer has not granted opportunity to being cross examine to the persons, whose statement were recorded during the course of assessment proceeding to the assessee. The investments made in shares were also accepted by the assessing officer during the previous year relevant to Asstt. Year 2013-2014 in the scrutiny proceedings u/s. 143(3). The assessee encloses herewith copy of assessment order which is on Page-158 To 160 of the Paper Book. The learned assessing officer has relied on the judgments which are not pertains to the fact of case of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure & Services Limited (None Listed Company). The assessee encloses herewith debit note by Scan Infrastructure Limited, which is on Page-77 of Paper Book Part-II. Thereafter, the assessee has received physical delivery of 4,22,500 shares of Swift IT Infrastructure And Services Ltd. on 16/03/2012. Swift IT Infrastructure was none listed company and does not come under the preview of SEBI (ACT). The aforesaid shares were dematerialized with Karvy Stock Broking Limited on 11/03/2013. Later on Company Swift IT Infrastructure Pvt. Ltd was amalgamated with "Parag Shilpa IT Infrastructure and Services Limited". The assessee encloses the order of Hon'ble High Court of Judicature at Bombay sanctioning a scheme of amalgamation of Swift IT Infrastructure & Services Limited with Parag Shilpa Investments Limited & New Name is Parag Shipla IT Infrastructure And Services Ltd., which is on Page-78 to 83 of Paper Book Part-II. As per the order of amalgamation of Hon'ble High Court of Judicature at Bombay, Bench at Mumbai dated 03/05/2013. The assessee has already submitted letter of demat of physical share certificates alongwith acknowledgement of receipt of shares from Karvy Stock Broking Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment is based on suspicion and enquiry made by the Principal Director of Income Tax (Investigation) Kolkatta and on the basis of statement which were not confronted to the assessee; iv. The order of the assessing officer is arbitrary and without affording the reasonable opportunity to the assessee. There is violation of principles of natural justice to the assessee; v. Suspicion cannot be a good evidence for the purpose of assessment unless it is corroborated by clinching evidence brought on record after affording reasonable opportunity to the assessee; vi. Payment for purchases and sales both have been made by cheque and duly reflected in the bank statement; vii. The sale of shares has been done through MPSE Securities Limited on screen based trading system; viii. The shares were held by the assessee for more than one year and security transactions tax has been paid on this transaction; ix. These facts which emerge from the assessment order in no way have been disputed by the assessing officer. No direct evidence has been brought on record by the assessing officer to show that the transaction was an arranged/bogus transaction; x. There is no evidence on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation received from DDIT which is based on admission of Shri Mukesh Chokshi. Therefore accordingly, we direct the AO to assess the long term capital gain declared by assessee as such and accept the same. 3. I.T.A. No. 3801/Mum/2011 (ITAT, Mumbai) Ms. Farrah Marker -Vs- Income Tax Officer In this factual and legal matrix of the case, as discussed above, we find that the addition under section 68 of the Act made and confirmed by the authorities below to be unsustainable and therefore, directed the AO to deleted the said addition and accept the LTCG income shown as exempt under section 10(38) of the Act. 4. (2015) 281 CTR 241 (SC) Andaman Timber Industries -Vs- Commissioner Of Central Excise Not allowing assessee to cross-examine witnesses by adjudicating authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice 5. I.T.A. No. 1175/Mum/2012 (ITAT, Mumbai) Smt. Durgadevi Mundra -Vs.- Income Tax Officer 6. (2010) 329 ITR 110 (High Court, Delhi) Sarthak Securities Co. (P) Ltd. -Vs- Income Tax Officer Reassessment-Reason to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in shares and dealing in shares for the purposes of business-It held that the delivery based transactions are to be treated as investment transactions and the profit received therefrom is to be treated as short-term or long-term capital gain depending on the period of holding of shares-Tribunal has correctly held that though the principle of res judicata is not attracted since each assessment year is separate in itself, there ought to be uniformity in treatment and consistency when the facts and circumstances are identical-This approval of the Tribunal has to be upheld as the Revenue did not furnish any justification for adopting a divergent approach for the assessment year in question-Tribunal having applied the correct principle in arriving at the decision on the facts of the case, no substantial question of law arises 12. (2009) 20 DTR 0099 (ITAT, Mumbai) Gopal Purohit -Vs- Joint Commissioner of Income Tax Assessee's claim of short-term and long-term capital gains from transactions in shares having been allowed on identical facts in earlier assessment year, could not be disallowed merely because in the year under consideration, the Finance Act, 2004, had conferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24/03/2017 vide appeal No. CIT(A)-4/ 350/10-11 in case of Shri Vishwas Shridhar Kukde -Vs.- ITO, Ward-4(2), NagpurP-II In view of the above assessee humbly request that claimed made by the assessee is true and correct and same may kindly be allowed. Ground No. 10 & 11 : The assessee has made investment in shares amounting to Rs. 20.61 crore and same were duly reflected in the books of account and also shown in the Balance Sheet as Investment. The assessee having its own capital is at 30.84 crore as well as loans at Rs. 12.89 crore out of which sum of Rs. 11.70 crore interest free loan. Thus the assessee was having sum of Rs. 42.54 interest free funds which is more than investment made in tax free securities i.e. Rs. 20.61 crore. The assessee has also possessed excess interest free fund at Rs. 21.93 crore sufficient than the investment made by the assessee in tax free securities. Therefore the assessee has claimed interest expenses at Rs. 17,07,743/- only, which is on Page-6 of Paper Book. The assessee has paid interest of LIC at Rs. 14,86,720/-, interest on vehicle loan at Rs. 2,19,536 and bank commission and charges at Rs. 1,486/- and same were duly reflected in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax -Vs.- M/s. Subramanya Construction & Development Co. Ltd.P-II 3. (2013) 218 Taxman 0142 (Guj. HC)P-II CIT-Vs.- Gujarat Industrial Development Corporation Ltd. Tribunal was satisfied in affirming deletion of disallowance under section 14A when revenue failed to establish that assessee had incurred any expenses for earning dividend income from the amount borrowed, therefore, tribunal was justified in affirming deletion of disallowance under section 14a. On appeal CIT(A) deleted the additions. 4. (2010) 323 ITR 0158 (Guj. HC) P-II Commissioner of Income Tax -Vs.- Hero Cycles Ld. Income-Expenditure incurred in relation to income not includible in total income-Disalolwance-Validity-Assessee had dividend income under category of exempted income-No expenses against earning of such income had been showed in return-AO made disallowance u/s. 14A applying Rule 8D-CIT(A) deleted addition-ITAT confirmed deletion-Held, despite notices by AO to give details of expenditure made on earning of exempted income in nature of dividend, version of assessee was that he had not made any expenditure on earning such income-AO as per Section 14A(2) was to proceed further to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer. 7.1 The assessee has filed e-return of income on 14/01/2015 declaring net taxable income at Rs. 32,63,962/-. The case was selected for scrutiny and notices u/s. 143(2) & 142(1) were issued to the assessee. In response to notices, the counsel for the assessee attended from time to time and submitted the details called and explained the return. The assessee had purchased 422500 shares of Swift IT Infrastructure & Services Limited (SITSL) on 16/03/2012 physically at the rate of Rs. 10/- and same were duly reflected in the books of account of the assessee as well as shown in balance sheet as investment during the previous year relevant to A.Y. 2012-13. The aforesaid shares were sold during the previous year relevant to Asstt. Year 2014-2015. The period of holding of the share is more than twelve months, and the said transaction were treated as long term capital transaction on which the assessee has claimed exemption u/s. 10(38) of Income Tax Act, 1961. 7.2 The assessing officer has not accepted the claim of the long term capital gains. The reason for the same is the report of investigation carried out by Pr. Director of Income Tax (Investigation), Kolkata in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts as under 1. As per Para-1 - "It is seen that the name of Shri Nandkumar Khattumal Harchandani son of Shri Khattumal Harchandani also features in the list of cases who availed bogus LTCG and claimed exemption from tax as per provision of Section 10(38) of the I.T. Act, 1961". The assessee strongly objects to the said allegation made in the report. As the list of paper companies, list of dummy directors and even the statements of persons involved in providing accommodation entries provided, no where the name of assesse or company "Parag Shilpa Infrastructure Ltd." features in the list. The assessee is merely an individual who has invested the said amount as an investment and later on sold the same. The assessee has invested the amount as an investment and sold the share. The assessee has made all the transaction through BSE through proper banking channel and paid STT as well as these transactions were legally valid transaction. The entire amount was received through proper banking channel and credited the books of account of the assessee. The Sale amount mentioned in the report were also incorrect. Therefore, the assessee respectfully submits that the assessing officer has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer observed that the companies are controlled by them through dummy directors. The assessee respectfully submitted that there is no dummy director in the case of assessee. It is further observed by the learned A.O. that the broker often compromises of KYC norms of the clients to help the syndicate member. The assessee respectfully submitted that in the case of assessee all norms of KYC were followed and were followed regularly. In the aforesaid para, the Assessing Officer referred two types of method i.e. conventional method and merger method. The assessee respectfully submitted in the case of assessee both the method were not applicable. Modus operandi as described by the learned AO in his order is totally different and irrelevant in the case of the assessee as - No evidence on record approaching to the Entry Operator by the assessee. - No nexus of any nature has been established between the Assessee and Entry Operators, Brokers, Sub-Brokers and other entities. - No purchases of share by the Assessee through private placement. - No evidence of delivering cash to the entry operator. - No evidence of routing cash in the books of bogus companies. - The sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodation entry. The learned assessing officer have as well failed to provide any direct or corroborative evidence against the assessee to prove this allegation. Therefore allegation made with respect of bogus LTCG or accommodation entry is factually incorrect and denied in toto. Relevant Case Law : * Recently Hon'ble ITAT Delhi in the case of Chander Prakash v. ITO in ITA No. 6880/Del/2017 dated 12.03.2018 held that 2018 deleting addition on same facts of the assessee under No addition u/s 68 on account of penny stock if assessee submitted all evidences in support of sale and purchase and entire transaction was through banking channel. The AO made an addition of Rs. 31,10,915/- holding that the long-term capital gain earned by the assessee on its investment in the shares of M/s. HPC Biosciences Ltd. was not genuine and represented the unaccounted income of the assessee. The CIT(A) stated that the rise in value of the share was abnormal over a period of 13 to 14 months, ad realization of such capital gain without any past experience in trading of shares raised a very strong suspicion so as to question the authenticity of the transaction. Thus, the CIT(A) also confirmed the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares were amalgamated to Parag Shilpa Infrastructure Limited. Thereafter the share were transferred to MPSE Securities Limited from where the sales of shares were affected on 04/03/2014 onwards. In support of contentions, the assessee has submitted the letter regarding deliver slip for share transfer to "Mittal Share brokers Pvt. Ltd." alongwith statement of accounts of Karvey Stock Broking Ltd and transaction statement of MPSe Securities Ltd. during the course of assessment proceedings before the assessing officer. In support of its contention the assessee has submitted details of the same which is on Page-101 To 110 of the Paper Book (Part-I). The assessee is having Client ID issued by MPSE Securities Limited, which is clearly shows the name, address, bank details. The assessee has also submitted details of Client ID during the course of assessment proceedings, which is on Page-111 of the Paper Book (Part-I). The assessee has sold the aforesaid shares for total consideration of Rs. 2,84,34,115/- during the previous year relevant to Asstt. Year 2014-2015 and shown book profit at Rs. 2,79,05,115/-. Since the period of holding of the shares is more than one year the capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infrastructure shares, but assessee has purchased Swift IT Infrastructure Ltd. was amalgamated with Parag Shilpa IT Infrastructure Ltd. Therefore, information given with respect of market movement of shares of Parag Shilpa Investment Ltd. which the assessee received by virtue of amalgamation order of Hon. High Court, was beyond the control of the assessee and assessee cannot influence the same. The learned assessing officer has not proved that assessee has influenced the same and no evidence was brought on record. The assessee also respectfully submitted that share market behaves in a unique manner. Further, each script generates its own unique return and has its own behaviour pattern. There are innumerable cases of such companies wherein the share prices increases so many times. This sometimes results in investor earning less than market return and sometime more than market return. In the instant case, the assessee has earned good returns on the said investments and just like any other prudent investor encashed the same where he felt it was the right opportunity to do so. Merely because the share prices have fluctuated so much, the transaction of the assessee cannot be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parag Shilpa Investments Limited as approved by the shareholders and sanctioned by Hon'ble High Court. It is also pertinent to note that the assessee has received the shares by virtue of the amalgamation, and the assessee have not invested directly in the said stock. Further the assessing officer in Para 5.2, mentioned that "assessee wrote letter to Karvy on 26/02/2014 for share transfer but tis letter does not mention the name of Parag Shilpa or Swift Infra". The assessee respectfully submits that since the Karvy stock broking Ltd. were not giving proper response and not giving the delivery slips of shares to assessee and creating routine nuisance, the assessee has decided to transfer all the shares with Karvy Stock broking Ltd. to Mittal Share brokers Pvt. Ltd. It was the personal business problem faced by the assessee as an investor due to which the assessee transferred the shred from Karvy Stock broking Ltd. to Mittal Share brokers Pvt. Ltd. Hence the said issue is no way connected with the said transaction as mentioned in the report. 7. As per Para 6.1 & 6.2 "the assessee has adopted a very old modus operandi of showing of investment for purchasing shares of Shri Ganesh Sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere sold at the loss of Rs. 57,46,180/-, the entire loss has been taken in the return of income filed by the assessee and accepted by the department and against the sale proceedings the assessee has invested the amount for purchase of 226000 share of Shri Ganesh Spinners. Entire transaction were took place through registered broker through Bombay Stock Exchange. This 226000 share were sold to Scan Infrastructure Pvt. Ltd. for an amount of Rs. 42,6,200/- on 19/09/2011. Scan Infrastructure Pvt. Ltd has not paid the sale proceeds for Shree Ganesh Spinners and requested to assessee to take the share of Swift Infrastructure Ltd. which were physically delivered on 16/03/2012, hence this manner how share of Swift IT Infrastructure Ltd. were purchased by the assessee. After that being the shares of limited non listed company the same is not necessary to be dematerialized hence the assessee had not dematerialized the same. The assessee also draw attention that so far as section 16 of Security Contract (Regularization) Act 1956 i.e. SCRA, the same were not applicable for non listed companies. The SEBI is applicable for only listed companies. As per para 6.3 "Here also assessee has shown pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold the shares for more than one year". The assessee respectfully submitted that assessee has purchased 422500 shres on 16/03/2012 and during the previous year relevant to Asstt. Year 2014-15, the assessee has sold 53000 shares on 04/03/2014 onwards i.e. also holding of more than 24 months from the date of purchase of shares. The assessee further submitted during the previous year relevant to Asstt. Year 2015-2016, the assessee sold 106000 shares on 10/05/2014 onwards i.e. also holding of more than 24 months from the date of purchase of shares. The assessing officer has also mentioned in Para 7.3 "in the case of the scrip of Parag Shilpa also the entry operators have admitted to this modus operandi namely (1) Devesh Upadhyaya, (2) Praveen Agarwal and (3) Jagdish Purohit". The assessee draws attention that in the statements of the said entry operators (1) Devesh Upadhyaya, (2) Praveen Agarwala and (3) Jagdish Purohit there is no script or the assessee even the name of the assessee or company Parag Shilpa Infrastructure Ltd. any where as bogus or paper companies. Further there are many ambiguities in the extracts of statements so quoted by the ld. A.O. The assessee has also not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 6248/Mum/2012-Assessee has produced the bills showing the purchase of the shares. The assessee has also proved that the shares were sold through the registered share broker and produced the proof of the same. The only basis on arriving at the conclusion that the transaction is not genuine is on the basis of statement given by the Mr. Mukesh Chokshi. * Hon'ble ITAT Mumbai in case Arvind Asmal Mehta Vs. ITO (ITA No. 2799/Mum/2015)-Where in the year of purchase of shares, AO has not challenged the acquisition of shares, it is quite inappropriate to hold such acquisition as bogus in the year when subsequently such shares are sold. D-mat a/c. of assessee is evident that sale of share does justify an inference that assessee was indeed in possession of shares. Though a reference has been made to the investigation in case of Mr. Mukesh Chokshi, but no effort has been made by the AO to demonstrate that qua the instant transaction of the assessee, any infirmity has been confessed by Sh. Mukesh Chokshi. Inspite of several request made by the assessee to authorities to cross examine Mr. Mukesh Chokshi statement. Also the addition in respect of commission payable in respect of accommoda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer had not done so. Therefore, under the facts of the case, the order of the Judicial Member confirming the order of Commissioner (Appeals) deleting the impugned addition was justifiable. [Para-14]" * Hon'ble Ahmedabad ITAT in the case of Vijaybhai H. Shah v. Dy. CIT (6 SOT 75) held that statement of a person recorded on back of assessee can be used against assessee only if opportunity for cross-examination is granted. * Hon'ble ITAT Mumbai in the case of Ms. Farrah Maker v. ITO, ITA Number 3801/Mum/2011-Held that the addition u/s 68 of the Act merely on presumptions, suspicions and surmises in respect of penny stocks; disregarding the direct evidences placed on record and furnished by the assessee in the form of brokers contract notes for purchases and sales of the said shares" of M/s Shukun Constructions Ltd., copies of the physical share certificate and here D-MAT account statement establishing the holding of the shares in her name prior to the sale thereof; confirmation of the transaction of buying and selling of the "said shares" by the respective stock brokers receipt of sale proceeds through banking channels, etc. It was also found that the assessee was not provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is an individual who has invested in the share of SITIT as an investment, and later on sold the same. The sale transaction were through BSE and through regular banking channel and STT was paid thereon as well while makes these transactions legally valid transaction. The entire amount of sale proceeds was received through proper banking channel and credited in the books of account of the assessee. The sales amount mentioned in the remand report were also incorrect. Therefore, the assessee has submitted that the assessing officer has committed gross error by making addition in the assessee"s case on the basis of just information received from the Pr. Director of Income Tax (Inv) Kolkata, which were not related to the assessee at all and as none of the evidence furnished have been falsified by the AO. 2. issue of bogus LTCG : In Para-601, the Assessing Officer has mentioned that M/s. Swift IT Infrastructure Limited is a new company. In Para-6.2, the Assessing Officer observed that companies are controlled by them through dummy directors. In para 6.3, the A.O. has described the transaction as beneficiary sold a fixed number of shares at a nominal rate by offline trading don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure & Services Ltd. (PSIT Infrastructure & Services Ltd). The physical share of SITIT were sent to dematerialization with Karvy Stock Broking Limited on 11/03/2013. These are uncontroverted facts. Supporting documents have been submitted and examined at various levels-by the Investigation wing, by the AO and during appellate proceedings. In the case of assessee, all norms of KYC were followed and were followed regularly. In the case of assessee, the transaction was online trading transaction and STT was paid on the sale transaction. 2.1.1 Documentation submitted during the assessment proceedings were examined during the appellate proceedings it was found that- 1. Regarding the transactions per se, the assessee has physically received 422500 share of Swift IT Infrastructure and Services Ltd. on 16/03/2012 during the previous year relevant to Asstt. Year 2013-14 and the same were shown in the balance sheet of the assessee as investment. The AO has tried to link the sale of shares Ganesh Spinners which was sold on 19.09.2012 to the purchase of shares of Swift It on 16.03.2012, by alleging swapping of shares of Ganesh Spinners and purchase of share of Swift IT Infrastructure & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nel and duly reflected in the books of account of the assessee. I find that these evidence have not been controverted and neither have the AO falsified these documents, or proved them non-genuine. 4. The A.O. has alleged that the assessee has indulged in the merger method for obtaining high valume of shares, and sale thereof. I find this allegation quite glaringly untrue. That the shares of Swift IT Infrastructure and Services Ltd. was merged with some other companies was an independent event and the assessee's hand in this merger was not found, and hence the question of indulgences did not arise. In the case of assessee, the sale of the shares (renamed as Parag Shilpa by the order of Bombay High Court) was through Bombay Exchange and not to any shell company as stated in the assessment order. After examining all the documents in the present case, there is found no involvement of any shell companies in the case of assessee. The entire trading was made through Bombay Stock Exchange, and the company Parag Shilpa is still an active company in the records of ROC. 5. The A.O. has mentioned certain names of company alongwith its promoters. The A.O. observed that the statements of som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver to the assessee. I find that the AO has again levelled an untested allegation, as the stated transactions are normal procedural actions to which no malafide can be ascribed. The AO has made an imaginative attempt to cast doubt on the transactions, where no anomalies are proved or found. 7. The assessee has infact produced all possible documents to show the series of share transactions over the five year period from F.Y. 2009-10 to prove that he has regularly engaged in investments in shares since long. It is a fact that the assessee has not undertaken a one-off transaction that could justify the allegations made by the AO. The assessee regularly filed return of Income. The assessee has submitted copy of Acknowledgment of return of income, computation of income, balance sheet and profit and loss account alongwith group summary of investment in securities for A.Y. 2010-11 to A.Y. 2014-2015, which are part of record. The entire transactions beginning with the purchase of Well Pack Paper and Containers Ltd. in 2010 has been substantiated adequately. The assessee has paid an amount of Rs. 1,00,00,000/- (Rs. One Crores) to MPSE Securities Limited, who is a member of Madhya Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n"ble High Court of Judicature at Bombay, Bench at Mumbai dated 03/05/2013. The assessee has submitted letter of demat of physical share certificate alongwith acknowledgment of receipt of shares from Karvey Stock Broking Ltd. (Page-101 To 110 PB Part-I). Later on the aforesaid share were transferred to MPSE Securities Limited from where the sale of share were affected on 06/03/2014 onwards. The assessee has already submitted the letter regarding deliver slip for share transfer to "Mittal Share Brokers Pvt. Ltd." alongwith statement of account of Karvy Stock Broking Ltd. and transaction statement of MPSE Securities Ltd. The fact that the assessee received physical deliver of share on 16/03/2012 undoubtedly proves that the assessee was the owner of share on 16/03/2012. The AO"s contention that the shares were dematerialized later in 2013, and hence the shares were held less than one year is based on his unwillingness to recognize and appreciate true and correct facts, or his purposeful disregard for facts of the case. Either ways, the AO"s contention is not acceptable. The uncontroverted fact are therefore that the assessee purchased share on 16/03/2012 and dematerialized them on 11/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances, the assessee has rightfully argued that his investment and transaction in various shares, and the share of Parag Shilpa Infrastructure cannot be termed bogus merely on the basis of doubts and aspersions. 7.6 Thus, in view of the above facts and submissions which are supported by legal evidences and the case law reflected by the assessee as detailed in Para 7.4 above, it is held that the assessment was completed without following the principles of natural justice and the entire addition were made without any basis. The AO has made certain assumptions on the basis of Investigation Wing report received by him, without adducing any direct evidences that supports his assumptions. The AO has also ignored the evidences furnished by the assessee which is unfortunate, and which makes the assessment untenable. On the above mentioned admitted factual position, the judgments cited by the AR of the assessee fully support the case of the assessee. In view of above, I hold that the addition made by the A.O. is not correct, factually and legally, and disallowance of exemption u/s. 10(38) is directed to be deleted. Hence these grounds are allowed." Since the learned CIT(A) decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings before the Assessing Officer. During the course of assessment proceeding, all the facts and contents with respect of the transaction duly mentioned in the remand report and the learned Counsel explained all the issues effectively. We have also gone through the remand report wherein we find that according to the Assessing Officer, in the report sent by the Office of Pr. Director of Income Tax (Investigation), Kolkata, to the Pr. Director of Income Tax (Investi-gation), Nagpur, vide letter dated 27/04/2015, the name of the assessee features in the list of the persons who have availed bogus LTCG and claimed exemption under section 10(38) of the Act. The details of transactions entered into by the assessee were also forwarded to the Assessing Officer. We also noticed that the learned CIT(A) has rightly observed the all facts with respect to the transaction and also explained all the issues. We have gone through the impugned order passed by the learned CIT(A) as well as arguments of the learned Counsel for the assessee with supporting evidence. Keeping in view the overall facts and circumstances of the case and legal matrix of the case, we are thus in agreement with the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue fails on this issue. 13. We noticed earlier that Assessing Officer has assessed the sale consideration of shares as unexplained cash credit under section 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 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 section 68. We also hold that the addition made by the Assessing Officer is incorrect, factually and legally, and disallowance of exemption under section 10(38) and addition made under section 68 at Rs. 2,84,35,115, has rightly deleted by the CIT(A). 14. Since we have held that the sale transaction of shares cannot be doubted with, the addition made by Assessing Officer with regard to section 68 was rightly deleted by the CIT(A). The sale consideration received on sale of shares cannot be assessed as unexplained cash credit under section 68 of the Act and the long term capital gains declared by the assessee cannot be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mittal [2013] 361 ITR 0131 (P&H HC). 17. The learned Departmental Representative strongly relied on the order of Assessing Officer and vehemently objected to the contents of the impugned order passed by the learned CIT(A). 18. The learned Counsel for the assessee relied on impugned order passed by the learned CIT(A), who dealt with the issue at Page-38 to 41, which are reproduced below:- "7. Ground Nos. 10 and 11 : Disallowance u/s 14A of Rs. 15,75,789/- In these grounds of appeal, the appellant has challenged the addition of Rs. 15,75,789/- by working out the disallowable expenditure under section 14A of Income Tax Act 1961 r.w. Rule 8D of Income Tax Rules, 1962. The A.O. has discussed the addition in Para-12 of the assessment order. 7.1 The facts in brief leading to the dispute are that the assessee has made investment in share amount to Rs. 20,61,59,037/-. The assessee has borrowed fund of Rs. 12,89,09,181/- and on which interest amounting to Rs. 17,07,742/- has been paid. The assessee has received dividend amounting to Rs. 48,899/- which was claimed exempt u/s. 10(34) of the Act and claimed expenditure at Rs. 15,75,789/- in the return of income. The assessing officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd administrative expenses under section 14A, and hence, there was no question of estimation of expenditure in respect of interest & administrative expenses under Rule 8D of the Rules. The SLP filed by I.T. Department against this decision was dismissed vide order dtd. 23.03.2018, 93 Taxmann.com 24 (SC). In instant assessee"s case too thee are no interest bearing borrowed funds which were used for making investment and the total of own funds is more than the average investment yielding exempt income. The above decisions of the High Court & Hon"ble Supreme Court are squarely applicable and have binding precedents. 7.4 It can be seen that, same view has been taken by the jurisdictional High Court of Bombay.Once the surplus/interest free funds are excess of investment made, then in view of the ratio and principle laid down by Hon"ble Bombay High Court in Reliance Utilities (2009) 313 ITR 340 (Bom) and HDFC Bank (2014) 366 ITR 505 (Bom) as relied upon by the Ld. Counsel, no disallowance under section 14A on account of interest expenditure should be made. Their Lordships have clearly opined that, once in the Balance Sheet, the assessee has reflected surplus/own funds and also interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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