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TMI Blog2023 (4) TMI 1401X X X X Extracts X X X X X X X X Extracts X X X X ..... and it revealed that the prices of shares of those companies have been manipulated to generate bogus long term capital gains/short term capital losses. It was noticed that the assessee herein has sold shares of M/s Shreenath Commercial & Finance Ltd, which was identified as one of the penny stocks. The assessee had declared long term capital gains of Rs. 5,18,57,339/- on such sale and claimed the same as exempt. 3. The assessee had purchased 150000 shares of Rs. 10/- each at a premium of Rs. 10/- per share on 23.11.2009 by way of preferential allotment of shares. The AO also noticed that SEBI has levied penalty on the above said company for manipulation of prices of shares of above said company during the period from May to July 2008. The prices were found to have increased from Rs. 6.82 to Rs. 57.20 during this period. The AO also further noticed that the assessee herein was identified as a suspected beneficiary of another share scrip named M/s Pine Animation Limited. Accordingly, based on the information so given by the investigation wing, the AO took the view that the long term capital gains earned by the assessee from sale of shares of M/s Shreenath Commercial & Finance Ltd is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faction; on the basis of inaccurate particulars and without coming to the prima facie belief that there was escapement of income. Accordingly he submitted that the reopening of the assessment is bad in law. In support of his contention learned AR placed reliance on following case laws: * PCIT Vs. Shodiman Investments (P) Ltd. (422 ITR 337) * CIT Vs. Sfil Stock Broking Ltd. (325 ITR 285) * Inventors Industrial Corporation Ltd. Vs. CIT (194 ITR 548) * Coronation Agro Industries Ltd. Vs. DCIT (390 ITR 464) 7. The learned AR then advanced his arguments on merits. He submitted that the assessee has sold 1.20 lakhs shares for a consideration of Rs. 5.45 crores and earned long term capital gains of Rs. 5.18 crores. The Learned AR submitted that the assessee has purchased shares under preferential allotment scheme, by making payment through banking channels. The shares so allotted were having lock in period of one year. Further, the shares have been dematerialized in the demat account and thereafter sod through stock exchange. All these information and the corresponding documents evidencing purchase, sales, bank account copies etc., were furnished to the Assessing Officer during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of sales of shares and have disbelieved the transaction of sales of shares only on surmises and conjectures. 9. The Learned AR further submitted that the co-ordinate bench of ITAT, in the case of Mr. Ripu Sudan Kundra Vs. ITO (ITA No. 2792/Mum/2018 dated 5.10.2021), has considered an identical issue of sale of shares of M/s Sreenath Commercial and Finance Limited and has held that the assessment has been made purely on suspicion, surmises and conjecture without any tangible evidence brought on record and accordingly deleted the addition made by the Assessing Officer in that case. The Learned AR also placed on the decision rendered by Hon'ble Hon'ble Jurisdictional Bombay High Court in the case of PCIT Vs. Ziyauddin A. Siddique (Income Tax Appeal No. 2012 of 2017 dated 4.3.2022) and also decision rendered in the case of CIT Vs. Shyam R. Pawar (2015) 55 taxman.com 108(Bom) in support of the above said contentions. 10. The Ld D.R submitted that the assessee has challenged the reopening of assessment by filing Writ Petition before Hon'ble Bombay High Court, but withdrew it later. He submitted that AO has reopened the assessment on the basis of information given by the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr. Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted. 4. Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These 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 itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against the 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 judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 15. We notice that the identical allegation of non-genuine long term capital gains generated on sale of M/s Shreenath Commercial & Finance Ltd was examined by the co-ordinate bench in the case of Mr Ripu Sudan Kundra vs. ITO (ITA No. 2792/Mum/2018 dated 05-10-2021), wherein it was held as under:- "We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of the lower authorities are not based on evidence but on generalizations and probabilities. The AO could not place anything on record, maybe through a process of his own enquiry, to decisively prove that assessee has obtained bogus STCL through his connivance with entry operators / exit providers. No such enquiry or investigation is seen carried by the AO other than borrowing information to be used against the assessee from the general report of Investigation Directorate. The claim of the assessee appears to have been rejected more on the basis of presumption rather than evidence. The fact also remains that copies of statements used against the assessee were not provided to the assessee. It certainly has incapacitated the assessee from effectively rebutting the same and also from seeking an opportunity for cross examination. When copies of statements relied upon were not provided, when there was no opportunity to cross examine those witnesses whose statements were relied upon by the AO to conclude that the transaction in question was part of penny scam, we have no hesitation in holding that the lower authorities erred in disallowing the claim stating that the assessee failed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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