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TMI Blog2023 (6) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... e been routed through the bank accounts of the assessee. All these documentary evidences produced by the assessee have not been disproved. However, the AO has simply relied upon the report of the investigation department including the statements taken from certain parties and held that the long term capital gains declared by the assessee are not genuine. It is also not the case of the AO that those parties have implicated the assessee nor he could show that the assessee was part of the team which was involved in the triggering of prices. No other material was brought on record by the AO to prove that the assessee has indeed availed only accommodation entries. With regard to questions as to why the shares of the above said company was purchased, the assessee has explained that the said decisions were taken by his late father and hence he could not explain the reasons. It was not shown that the said explanation was incorrect and hence, in our view, the same cannot be rejected. The assessee has sold the shares when the prices have started falling, which is the usual tendency of the investors. Had he been part of the wing, which triggered the prices, he would know the peak price and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common order, for the sake of convenience. 2. The assessee is aggrieved by the decision of the learned CIT(A) in confirming the addition of Rs. 5 lakhs and Rs. 10 lakhs respectively made in A.Y. 2015-16 & 2016-17 towards unexplained expenditure under section 69C of the I.T. Act. The Revenue is aggrieved by the decision of the learned CIT(A) in deleting the addition of Rs. 2.14 crores made by the Assessing Officer under section 68 of the Act. 3. The facts relating to the case are stated in brief. The Revenue carried out search and seizure action under section 132 of the Act in the hands of the assessee on 12.2.2016. Consequent thereto, the assessments of the years under consideration were completed under section 143(3) read with section 153A of the Act. The search was conducted on the basis of information received from the Investigation Directorate of Kolkata that the family members of the above said assessee has availed bogus long term capital gains. The AO noticed that the equity shares of a company, which were purchased and sold by the assessee has been identified as "penny stock" by the investigation wing of the Income tax department. It is the allegation of the revenue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition confirmed by Ld CIT(A). 8. We shall first take up the appeal filed by the revenue for AY 2015-16. The revenue is aggrieved by the decision of Ld CIT(A) in deleting the assessment of sale proceeds of Rs. 2.14 crores received on sale of shares, as income of the assessee. We notice that the above said amount is the sale consideration received by the assessee on sale of shares. The facts relating to this issue are discussed in brief. The assessee initially purchased One lakh shares of M/s Kaushalya Global Limited having a face value of Rs. 10/- each for a total consideration of Rs. 10.00 lakhs from M/s Pranjal Trading Co P Ltd on 23.10.2012. The consideration for purchase was paid through banking channels. The above said company was amalgamated with M/s P L Enterprises Limited, vide order dated 24.6.2013 passed by Hon'ble Andhra Pradesh High Court. Subsequently, the name of the above said company was changed to "Matra Kaushal Enterprises Limited" and the face value of shares was also split. Accordingly, the assessee got 10.00 lakh shares and those shares were dematerialized on various dates during the year relevant to AY 2015-16 through a broker named M/s Magnum Equity Brokin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain as to why the long term capital gains should not be assessed as income of the assessee, as admitted during the course of search. In response thereto, the assessee submitted that the above said admission to withdraw the claim of exemption was made by him under the erroneous impression that he may not be having documents in support of the exemption claimed. Further, since these transactions were carried out by his father, he was unaware of the transactions carried by his father and he was under bonafide belief that his father had committed wrong under the Income tax Act. Accordingly, he agreed to withdraw exemption in the various Statements taken from him. He further submitted that he examined the details of share transactions afterwards and found that all the transactions are supported by proper documents and payments. Accordingly, the assessee submitted before the AO that the exemption claimed u/s 10(38) of the Act has been claimed as per law and the same should be granted. The assessee also submitted that the assessing officer has proposed to assess the capital gains u/68 of the Act, but the assessee has proved all the three ingredients with regard to sale of shares/lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to turn a blind eye to the evidence produced by the assessee. (b) the decision rendered by Mumbai bench of Tribunal in the case of Vijayrattan Balkrishan Mittal (ITA No.3428/Mum/2019 dated 0110-2019). Accordingly, he deleted the addition made by the AO. Consequently, the addition relating to estimated commission expenses was also deleted. The revenue is aggrieved. 14. The Ld D.R submitted that the assessee has shown payments and invoices for purchase of shares, but did not furnish copy of share certificate and share transfer form. The shares were dematerialized much after the date of purchase of shares. She further submitted that the financial statements of M/s Matra Kaushal Enterprises Ltd, would show that the financial position of the above said company would not justify the high share price movements. And it has also suffered losses. Accordingly, the Ld D.R submitted that the fundamentals of this company were very weak and hence no prudent business man will invest in this company. Hence, it is beyond human probabilities that the assessee has invested in this company. The Ld D R further submitted that accommodation entry providers and exit providers have confirmed that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had agreed to withdraw exemption u/s 10(38) of the Act, since he was given impression by the search officials that some wrong was committed by his father and further, he was under the impression that all the relevant documents were not available. However, subsequently it was noticed that all the supporting evidences are available and accordingly, the assessee came to the conclusion that there was nothing wrong in the transactions of purchase and sale of shares made by his father. The Ld A.R submitted that the assessee has given detailed reply to the AO in this regard. He further submitted that the AO simply relied upon the report of investigation wing in order to draw adverse conclusions against the assessee. He submitted that the AO did not enquire the broker of the assessee in order to find out the veracity of the transactions, i.e., no enquiry was conducted by the AO independently in order to show that the findings given in the report of the investigation wing is also applicable to the assessee. Accordingly, he contended that there is no reason to reject the claim for exemption u/s 10(38) of the Act. He further submitted that the exemption u/s 10(38) of the Act is a sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val contentions and perused the record. We noticed that the assessee has furnished all the details in support of purchase and sale of shares of M/s Matra Kaushal Enterprises Ltd and the said fact has also been noticed by the AO in the assessment order. We noticed that the assessee has purchased the shares by paying Rs. 10.00 lakhs through banking channels. Subsequently, the assessee became owner of 10,00,000 shares in the above said company after merger, split etc. During the year under consideration, the assessee has sold 4,14,500 shares through stock exchange. We notice that the assessing officer did not find any fault with any of the documents furnished by the assessee in support of purchase and sale of shares. The Ld D.R, however, submitted that the assessee has not furnished the copies of share certificates, share transfer forms etc. But the fact that the shares were dematerialized and credited to the account of the assessee would prove the fact of purchase of shares. In any case, it is not the case of AO also. Hence the transactions of purchase and sale cannot be doubted with as held by Hon'ble jurisdictional Bombay High Court in the case of CIT vs. Jamnadevi Agarwal (328 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the cases. In any case, we are dealing with some case laws later. In the instant case, we noticed that the assessing officer has mainly relied upon the report given by the investigation wing of the Income tax department, which included the statements given by the alleged entry operators and exit providers. We noticed that the AO did not carry out any independent enquiry in order to find out whether the assessee was part of ring which indulged in the alleged price rigging. The AO, in particular did not examine the brokers/persons from whom/through whom the assessee has purchased and sold the shares. Based on the reports of investigation wing, the AO has arrived at the conclusion that the assessee has availed accommodation entries by way of long term capital gains. In this process, the AO has ignored the fact that the assessee is a regular investor in shares. He also could not disprove the fact that the purchase and sale of shares of the above said company was carried out by the father of the assessee, who has since expired. 24. We notice that an identical case of allegations that the assessee has availed accommodation entries for bogus capital gains was examined by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. 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 Company was not such as would justify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion, 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. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law." 25. We may also refer to another decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No. 2012 of 2017 dated 4th March, 2022) and relevant discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance on the Kolkata Investigation Wing report, which are more general in nature, cannot be the basis for making addition u/s 68 of the Act, when the investigation wing has not implicated the assessee. Before us, the Ld D.R placed reliance on the decision rendered by Hon'ble Delhi High Court in the case of Suman Poddar (supra). In the case of Shri Yogesh P Thakkar (supra), the Tribunal has considered the above said decision and noticed that the same has been distinguished by Hon'ble Delhi High Court itself in the case of PCIT vs. Krishnadevi (ITA 125/2020 dated 15.01.2021). The relevant observations made by the co-ordinate bench are extracted below:- "5.12. We find that the ld. CIT(A) relied on the decision of Hon'ble Delhi High Court in the case of Suman Poddar vs ITO reported in 112 taxmann.com 329 dated 17/09/2019 where the decision was rendered in favour of the revenue. The Special Leave Petition filed by the assessee before the Hon'ble Supreme Court in this case was dismissed by the Hon'ble Apex Court vide its order dated 22/11/2019. But we find that there is yet another decision of Hon'ble Delhi High Court in the case of PCIT vs Krishna Devi and others in ITA 125/2020 ; 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a preplanned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (supra) too turns on its own specific facts. The abovestated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed. (emphasis supplied by us)" In the case of Smt Krishna Devi (supra), the Hon'ble Delhi High Court has held that the theory of human behaviour and preponderance of probabilities cannot be ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court in the peculiar facts and circumstances of the instant case." Hence the decision rendered by the jurisdictional High Court is required to be preferred in the instant case also. 28. In the instant case, even though the AO has initially stated that he is rejecting the exemption claimed u/s 10(38) of the Act, yet the AO has assessed entire sale proceeds received on sale of shares ad income of the assessee, meaning thereby he has made addition u/s 68 of the Income tax Act. The responsibility placed upon the assessee u/s 68 of the Act is different, i.e., the initial burden to prove the cash credits is placed upon the shoulders of the assessee. In order to discharge the said burden, the assessee has to prove three main ingredients, viz., the identity of the creditor, credit worthiness of the creditor and genuineness of transactions. If the assessee proves all the three main ingredients, then the burden to disprove them would shift to the shoulders of the assessing officer. If the AO fails to disprove the three main ingredients proved by the assessee, then the assessing officer is not entitled to make addition u/s 68 of the Act. The decision rendered by Hon'ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que (supra) are squarely applicable to the facts of the present case. Accordingly, we uphold order passed by Ld CIT(A) and accordingly hold that the Ld CIT(A) was justified in directing the AO to delete the assessment of sale consideration of shares as income of the assessee. 32. Since we have deleted the assessment of sale consideration of shares, the consequential addition made by the AO by way of commission expenses is also liable to be deleted. Accordingly, we uphold the decision of Ld CIT(A) in deleting the addition relating to commission expenses. 33. We shall now take up the appeals filed by the assessee for AY 2015-16 and 2016-17. The assessee is contesting the decision of Ld CIT(A) in confirming the addition of Rs. 5.00 lakhs and Rs. 10.00 lakhs respectively in AY 2015-16 & 2016-17 relating to unexplained expenditure u/s 69C of the Act. Since the addition has been made in both the years on the basis of very same material, both the appeals of the assessee are being disposed of together. 34. The facts relating to the above said additions are stated in brief. During the course of search proceedings, SMS messages found in the phones of Shri Pankaj K. Shah were examined by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld CIT(A) deleted the addition of Rs. 7 lakhs made in A.Y. 2016-17. Since the revenue has not challenged the above said relief granted by the assessee, the same has attained finality. However, the Ld CIT(A) confirmed the addition of Rs. 5 lakhs made in A.Y. 2015-16 and Rs. 10 lakhs made in A.Y. 2016-17. The assessee is challenging the decision rendered by Ld CIT(A) on the above said two additions. 38. We heard rival contentions and perused the record. We noticed that the AO has made the above said additions on the basis of SMS messages found in the phones of the assessee. We also noticed that the AO has called for ledger account copy of the assessee as available in the books of M/s Gloob Interior Design P Ltd. From the observations made by the AO in the assessment order, we notice that the above said Interior decorator has booked sales of Rs. 38.00 lakhs in the name of the assessee. According to the AO, the above said amount was expected to be received by cheque. However, the following observations of the AO would show that the above said interior decorator has received a sum of Rs. 40 lakhs as on 08-05-2015:- "b. In the SMS dated 08-05-2015 Sh Ankur Muchal has had stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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