TaxTMI 
TaxTMI 
2016 (7) TMI 16
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....sold the same in the year 2005 for Rs. 155.04 per share. Considering the above discussed facts and having regard to the investigation so done, these scrips were found to be penny stock and the capital gain declared was held to be only accommodation entries. Further, the broker M/s.Basamt Periwal and Co. through whom the transactions were effected had appeared as "DRI probing evasion by firms via jama kharchi" who was indulged in price manipulation through synchronized and cross deal in scrip of Ramkrishna Fincap P.ltd. Furthermore, it was also communicated that SEBI has passed an order dated 9.7.2009 regarding the irregularities and synchronized trades carried out in scrip of Ramkrishna Fincap Ltd. by the broker M/s.Basant Periwal & Co. In view of the above, the case was reopened after recording reasons by issue of notice u/s.148 dated 30.3.2012 which was duly served on the assessee. 4. In view of the above discussion, the AO did not accept assessee's claim of long term capital gain and added the same in assessee's income u/s.68 of the Act. By the impugned order the CIT(A) deleted the addition after having following observation :- "2.3 I have carefully considered the submissions....
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....i High Court decision in the case of M/s Rajat Export Import India Pvt. Ltd. vs.lTO 341 ITR 135 (DeL). The Head Note is as under: Reassessment--Reason to believe that income has escaped assessment-Fool proof case for making addition not necessary--Information received by Assessing Officer from investigation wing giving instrument number, date, name of bank and branch and account number, indicating assessee had taken accommodation entry from entry provider--Reopening of assessment on basis of information proper--Income-tax Act, 1961, s. 148. At the stage when reasons are recorded for reopening the assessment, the Assessing Officer is not required to build a fool proof case for making addition to the assessee's income; all that he is required to do at that stage is to form a prima facie opinion or belief that income has escaped assessment. The relevancy of the material before the Assessing Officer is to be judged only from that perspective and not from the perspective as to whether the material is sufficient or adequate to sustain the addition ultimately. That will be an aspect which the Assessing Officer will examine and decide in the course of the reassessment proceedings ....
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.... entry provider and the instrument number, date, name of the bank and the branch as well as account number were given. This information constituted reason to believe, prima facie, that income chargeable to tax had escaped assessment in the hands of the assessee. The material before the Assessing Officer was relevant and afforded a live link or nexus to the formation of the prima facie belief that income chargeable to tax had escaped assessment in the assessee's hands. Admittedly, the information received from the Director of Income-tax (Investigation) did contain material linking 8, stated to be an entry provider, with the assessee. The reasons to believe recorded in writing by the Assessing Officer were detailed and showed application of mind. It was therefore unnecessary to go into whether the assessee had been implicated in the statement of the director of Shri Mukesh Choksi. 2.7 In the above mentioned case the Assessing Officer had received information from Investigation Wing and accordingly reopened the assessment based on the information provided. Identical are the facts in appellant's case also. In view of the above discussion, I hold that the reopening is proper ....
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....nce of purchase of shares the bill was raised by the broker on the appellant. 1.3. In performance of the obligation against purchases of shares the appellant made the payment by way of a/c payee cheque which is duly debited in the bank a/c of appellant (Copy enclosed). 1.4. The stock exchange then after transferred the said shares of M/s.Ramkrishna Fincap Ltd in the Demat alc of the appellant held with depository HDFC Bank Ltd on 31/03/2004 (Copy enclosed). 1.5. Before selling the shares the appellant held these shares in his demat a/c for more than 1 year. 1.6. The impugned shares then were sold through M/s. Basat Periwal & Co on the floor of Kolkata Stock Exchange on various dates. Here it is pertinent to bring to your honour's notice that the said shares were sold on Kolkata stock exchange because the same were listed only on Kolkata stock exchange. 1.7. Pursuant to sell of shares the broker issued a contract note cum bill for sale of shares vide various bills.(Copy enclosed). 1.8. On sale of shares the appellant effected the delivery of said shares by way of demat instruction slip drawn in favour of broker who then transferred to Kolkata stock exchange. ....
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....ny control over price. Moreover there is no privy of contract between the buyer and seller As far as initiation of investigation on broker is concerned the appellant is no way concerned with the activity of broker. The appellant has made the investment in shares which was purchased and sold on the floor of stock exchange not from or to M/s. Basant Periwal & Co. Against purchase payment has been made by a/c payee cheque delivery of shares has been received thereby the contract is completed. Similarly shares have been sold, delivery has been given & payment has been received by alc payee cheque. Thereby sale contract is also complete in all respect as per Contract Ac 1956. Hence the appellant is no way concerned with the enquiry of Basant Periwal & Co by SEBI. It is pertinent to mention here that about purchase and sale of shares on the floor of Kolkata stock exchange the department is in possession of necessary evidence which were called by them. Still the Ld AO has not discussed by the order that assessee has purchased these shares on the exchange and not from Basant Periwal & Co. Basant Periwal & Co has acted as a broker only. In spite of all these the Ld AO doubted the transactio....
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....e and L TCG thereon has been allowed by the Hon'ble ITAT in the following decisions. Mahesh Mundra Mumbai vs ITO 21(1)ITA No. 1176/Mum/2012 ITO ward 20(1) vs Naveen Gupta in ITA No 696 (Delhi) SOT 2006 94 Delhi Mayur M Shah HUF Mumbai vs ITO 25(3) ITA No. 2390/Mum/2013 ITO v Smt Kusumlata in ITA No. 387 105 TT J (2006) 265 Jodhpur Chandrakant Babulal Shah vs ITO 16(2)(4) ITA No. 6108/Mum/2009 Dalpat Singh Choudhary vs ACIT (2012) 143 TT J 500 (Jodhpur Trib) ACIT v Shri Ravlndra Kumar ToshnivallTA No. 5302/Mum/2008 Jafferali K Rallonse v DCIT Central 5 in ITA No. 68/Mum/2009 Mukesh R Marolia v Addl CIT 6 SOT 247 Mrs Rajini devi A. Chowdhary v ITO ITA No. 6455/M/07 Dated 30/0412008 DCIT v Shri Pinakir L Shok in ITA No. 3030 & 3453/M/08 Dated 14/0712009 In the aforesaid decisions the broker through whom the shares were purchased and sold have deposed before the investigation wing and have given statement that these are mere accommodation entry or in some cases the where about of the broker is not known even through the Hon'ble ITAT has held that the transaction cannot be treated as ingenuine the below mentioned reasons. Whereas in appellants....
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....ellant along with the paper book and the impugned assessment order. During the course of the assessment proceedings itself, the appellant had filed copy of bank pass book, broker's bills for purchase and sale of shares, contract note, demat account, statement of securities transaction tax for equity etc. The above documents were furnished before me which is available in the paper book. 3.5 From the perusal of records, the facts emerged are as under:- The appellant bought 3000 share of Ramkrishna Fincap Ltd. on the floor of Kolkata Stock Exchange through a registered share broker M/s.Basant Periwal & Co. In pursuance of purchase of shares the bill was raised by the broker to the appellant. The appellant has paid the purchase consideration by cheque and debited in their Bank Alc. After paying the purchase consideration shares have been transferred in appellant's demat account which remained in demat account for more than one year. The impugned shares were sold through M/s.Basant Periwal & Co. on the floor of Kolkata Stock Exchange on various dates as the same were listed only on Kolkata Stock Exchange. Pursuant to sell of shares the broker issued a contract note cum b....
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.... Rajini devi A. Chowdhary v ITO ITA No. 6455/M/07 Dated 30/04/2008 11. DCIT v Shri Pinakir L Shok in ITA No. 3030 & 3453/M/08 Dated 14/0712009 In the aforesaid decisions, the broker through whom the shares were purchased and sold have deposed before the investigation wing and have given statement that these are mere accommodation entry or in some cases the whereabouts of the broker is not known even though the Hon.ITAT has held that the transaction cannot be treated as ingenuine. Whereas in the appellant's case M/s.Basant Periwal & Co. has never stated or there is any adverse findings that these transactions are not done on the floor of Kolkata Stock exchange. Merely because he has violated the bye laws of the SEBI cannot be the reason for treating the genuine transaction as bogus. The appellant has also relied on the Hon'ble Jharkhand High Court decision in the case of CIT vs.Arun Kumar Agarwal HUF 2010 Taxman 205 wherein they have held that transaction with even tainted share broker who has been fined cannot lead to genuine transaction as bogus. Since the facts are identical, the issue is squarely covered by the above decisions of the Jurisdictional ITAT and Jharkha....
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....in appellant's bank a/c. are also enclosed. The broker has deducted security transaction tax from sale consideration and same has been deposited with Government by the recognized stock exchange. 3.6, I have also perused broker's bills and contract notes issued by Basant Periwal & Co. in support of the transactions and the source of the proceeds along with copy of the bank pass book with Vijaya Bank maintained by the appellant for the period 8.9.2004 to.16:3.2006. The above clearly shows that the sale transaction carried out by the appellant was duly disclosed to the department. The Assessing Officer did not have any material on record to show that the sale of shares were bogus. The Assessing Officer had not carried out any investigation also in this regard. Purely relying on the report forwarded by the ADIT(lnv), the Assessing Officer came to a conclusion that' the entire transaction of sale of shares as bogus. 3.7. Identical issue, has been' adjudicated by the jurisdictional ITAT in number of cases involving, similar facts and circumstances. On the similar facts the transactions have been treated as genuine and LTCG thereon has been allowed by the Hon'ble....
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....l High Court in the case of Shyam R. Pawar, 54 Taxman.com 108. 8. We have considered rival contentions and carefully gone through the orders of authorities below and found from the record that the AO has treated the share transaction as bogus on the plea that SEBI has initiated investigation in respect of Ramkrishna Fincap Pvt. Ltd. The AO further stated that investigation revealed that transaction through M/s Basant Periwal and Co. on the floor of stock exchange was more than 83%. We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT(A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was d....