AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 786
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....ock and that the assessee has back dated the purchase of the said shares in transactions to generate artificial gain. He required the assessee to substantiate her claim of exemption on the capital gain arising on the sale of the said shares. After considering the details, documents and submissions filed by the assessee in support of the claim of exemption from LTCG on sale of the said shares and discussion of available data on penny stocks, modus operandi generally adopted by interested persons to avail the arranged exemption of LTCG/STCG/ speculation profit/loss, stock price movement of the said company and on the basis of the statement recorded from one Shri Niraj Sanghvi, the AO concluded that the LTCG shown by the assessee on sale of the said shares of Shukun Constructions Ltd. is not a genuine transaction but a fabricated one. In that view of the matter, the AO, while concluding the assessment, treated the entire sale proceeds of the said shares amounting to Rs. 95,12,812/- as unexplained cash credit under section 68 of the Act and brought the same to tax in the assessee's hand. The assessment was accordingly completed under section 143(3) of the Act, vide order dated 31.12.20....
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....-term capital gain income u/s.111A on evidential strength of dematerialization of the said sold shares in the name of appellant assessee almost before 3 months prior to its sale, which has been confirmed by the respective share broker as well as Stock Exchange in cross verification carried out and no irregularity or any allegation for the same has been found or made. 4- That the all the appeal grounds raised hereinabove are independent grounds and without prejudice to each other." 3.2.1 On a perusal of the grounds raised (supra), it is seen that all of these are interlinked and pertain to the addition of Rs. 95,12,812/- of unexplained cash credit under section 68 of the Act. At the outset, the learned A.R. for the assessee submitted that all the grounds raised challenge the addition made and upheld under section 68 of the Act and also with regard to the assessee's claim for exemption under section 10(38) of the Act in respect of the LTCG arising on sale of the said shares of M/s. Shukun Constructions Ltd. The learned A.R. for the assessee vehemently argued that the order of the assessment has been made by the AO only on presumptions, conjectures and surmises, totally disregard....
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.... enquiry by the AO revealed that the sale transaction of the said shares is at the prevailing market rate as confirmed by the BSE on which it was listed and traded. It was also submitted that the transaction of sale of the said shares was confirmed by the concerned stock broker, M/s. Khambatta Securities Ltd. registered with SEBI and BSE and the sale proceeds were remitted by them to the assessee through banking channels after receiving it from the exchange. The learned A.R. for the assessee assailed the assumption of the AO about the modus operandi generally adopted by interested persons through tainted stock brokers for arranged back dated purchase of penny stocks/shares, late filing of return, etc. is contrary to all the facts of the case and the evidence brought on record and filed by the assessee to establish that in the case on hand, the assessee had filed her return of income for A.Y. 2004-05 (i.e. the year in which the said shares were purchased) within the due date as per the provisions of section 139(1) of the Act. It is submitted that the purchases of the said shares has been shown by the assessee in her balance sheet as on 31.03.2004 which is duly audited within the sta....
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....4.08.2012) and (ii) Harkhchand K. Gada HUF (ITA Nos. 1772, 1773, 1775, 1778 & 1779/Mum/2010 and others dated 08.08.2012. 3.2.5 The learned A.R. for the assessee contends that all the facts and evidences placed on record before the authorities below goes to establish that the orders of the AO/CIT(A) on the issue of treating the sale proceeds of Rs. 95,12,812/- on sale of the said shares as unexplained cash credits under section 68 of the Act were based not on any findings of any material fact but merely on suspicion and surmises. The learned A.R. for the assessee further questioned the legal sanctity and tenability of the AO's strong reliance for his actions on a statement recorded behind the back of the assessee from one Shri Niraj Sanghvi received on 31.12.2007, the date on which the order of the assessment was passed for A.Y. 2005-06. The learned A.R. for the assessee submitted that the purchases of the said shares were made through M/s. Falgun Invest whose Proprietor is Smt. Charu N. Sanghvi, whereas the statement relied on by the AO in the order of assessment was of Shri Niraj Sanghvi, husband of Smt. Charu N. Sanghvi on 31.12.2007, the day the order of assessment was passed w....
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....brought on record by the assessee. Even the statement recorded on 31.12.2007 by the AO from one Sir Niraj Sanghvi, which was strongly relied upon by the AO, we find has no evidentiary or corroborative value as it is of a person who has no role in the said share purchase transactions. Further, the said statement, recorded on the day the order of assessment was concluded, i.e. 31.12.2007, was recorded behind the back of the assessee and neither copy of the same was given to the assessee for rebuttal, nor was the assessee allowed due opportunity to cross-examine Shri Niraj Sanghvi. It is seen from the record that no statement was recorded from Smt. Charu Sanghvi, Proprietor, Falgun Invest from whom the assessee purchased the said shares of M/s. Shukun Constructions Ltd. In this factual and legal matrix as discussed above, we find that the statement of Shri Niraj Sanghvi, which was so strongly relied upon to form the basis of the AO's conclusion, is fatally flawed and has no corroboratory or evidentiary value since it was recorded behind the back of the assessee and was used to arrive at an adverse finding in respect of the assessee's purchase of the 'said shares' without putting the a....
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....after till 31.03.2011, which he has not done. 3.4.4 We also find that the decision of the ITAT, Chandigarh Bench, in the case of Somnath Mani (100 TTJ 917) relied on by the AO is factually different and not applicable to the facts of the assessee's case. In that case, the facts were that the sale proceeds of the shares sold were not reported on the transaction date at the concerned Stock Exchange. Further, the said shares continued to appear in the name of that assessee for quite a long period after the sale and also the sale proceeds were received by that assessee only in instalments over a period of six to seven months after the date of sale of shares. In the case on hand, however, we find that the factual matrix is quite different. In the case on hand the assessee received the full sale proceeds of the sales of the 'said shares' from the stock broker as and when they were sold; BSE has confirmed her sale transaction on the date shown and also the fact that the said shares on sale have been transferred to the buyer immediately is evident from her D-MAT account. In this factual matrix, we find that the decision in the case of Somnath Mani (supra) is factually different and distin....
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....-examine a witness whose statement was relied upon to form the basis for taking an adverse view in that case, overlooking the direct documentary evidence placed on record of the sale/purchase transaction in shares such as brokers contract notes, confirmation of receipt of sale proceeds through regular banking channels, reflection of these transactions in the assessee's audited financial statements and relevant returns of income and it was held by the Bench that in these circumstances, the sale of shares could not be held to be non-genuine. 3.4.8 From the appreciation of the facts of the case, the material evidence placed on record by the assessee and in the light of the discussion of the factual and legal matrix of the case as discussed from para 3.1 to 3.4.7 of this order (supra), we are of the considered opinion that the authorities below, i.e. AO/CIT(A) have made the addition under section 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., copi....