TaxTMI 
TaxTMI 
2017 (11) TMI 1075
X X X X Extracts X X X X
X X X X Extracts X X X X
....Textile Mills Ltd. The AO noted that the assessee purchased 13,500 shares of Tuni Textile Mills Ltd on 06/04/2011 from a stock broker in an off-market transaction from M/s Badri Prasad & Sons who was a member of the Calcutta Stock Exchange. These shares were held in the demat account of the assessee maintained with M/s CD Equi search Private Limited and was sold through the CD Equi search Private Limited a member of the Mumbai Stock Exchange and on such sale Security Transaction Tax was duly paid. The payments were duly received in the bank account of the assessee. The AO found that there was an investigation conducted against this Company by the Director of Investigation and as per the report several companies were used for providing bogus capital gains and one such company was Tuni Textile Mills Ltd. The AO had issued notice to the broker and stock exchange to verify the off-market purchase transaction and no reply was received in response to the said notice. The AO took note of similar patterns of transactions carried out by other companies which was detected by the Investigation wing and the AO examined the audited accounts of Tuni Textile Mills Ltd and found that on 25-01- 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....following: (i) Balance Sheet of the assessee for FY 2011-2012 wherein the investment made in shares were duly recorded and reflected. (ii) The Bills for purchase of the shares of Ms Tunni Textile Mills Ltd (iii) Copy of Demate Statement maintained with Ms CD Equisearch P Ltd where the shares were held. (iv) Copy of contract notes issued by CD Equisearch P Ltd, member of Mumbai Stock Exchange having SEBI registration no INB 010781133 and code no 087. (v) The bank statement of the maintained with Bank of Maharastra reflecting the payment received for the sale of shares. 7. The submissions of the ld AR are summarized as follows: (a) That the assessee had not purchased the shares by the Preference Share Route. The allotment made in preference share was on 25-01-2010 while the assessee purchased the shares on 06-04-2011 through the broker. (b) That the transactions of purchase of shares were not doubted by the AO in the year of purchase i.e AY 2010-2011. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....71 and Omar Salay Mohamed Sait 37 ITR 151. The ld AR submitted that the entire case of the revenue is based upon the presumption that the assessee has ploughed back his own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion how so ever strong it may appear to be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. The ld AR referred to the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT [2017] 164 ITD 1 (Mumbai-Trib.)(SB). (f) The ld AR drew our attention to the fact that neither the statement relied on by the authorities below were provided to the assessee nor any cross examination was allowed to prove the veracity of the statement. The ld AR drew our attention to the fact that in the statement of third party, the name of the assessee was not implicated. Even otherwise, according to ld AR, no adverse inference could be drawn against the assessee on the basis of untested statements without allowing opportunity of cross-examination. The ld AR referred to and relied on the following judgements in support of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....planation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the ld AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the ld AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the ld AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (iii) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) - In this case the Hon'ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. (iv) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] - In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the ld AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble High Court at Calcutta in the case of ALPINE INVESTMENTS ITA 620 of 2008dated 26th August 2008 wherein the Hon'ble Court held as follows: "It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed." (k) The ld AR concluded that where the purchase and sale transactions are supported....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon'ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. As per the ld AR the AO/ CIT(A) was not justified in invoking the provisions of section 68 of the Act to hold that the sale proceeds of shares. There is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker with CSE. The assessee produced all evidences to explain the source of the amounts received by the assessee from the brokers. The AO was not justified in assessing the sale proceeds of shares as unexplained cash credit under section 68 of the Act. 8. On the other hand, the Ld. DR vehemently opposed the plea of the Ld. AR and relied on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons stated below:- We note that the assessee was not a part of 47 persons, who the managing director has named in the list of 47 persons and we also note that there is no material to remotely suggest that the assessee dealt with the said entry operator Shri Manish Baid, who is said to have stage managed and undertaken the entire transactions. We also find that the assessee has not dealt with any person or broker named in question no.28 of the statement which has been recorded on oath by the survey team and which has been reproduced by the ld. CIT(A) from pages 31 to 36 of the impugned order(Question no.28 finds place in page-35 of the impugned order). We therefore find merit in the submissions of the assessee that the statement recorded on oath during the survey cannot be the sole basis for adverse finding against the assessee. For this we rely on the decision of the Hon'ble Supreme Court in the case of CIT vs Khader Khan Son 352 ITR 480 (SC) wherein it has been held that section 133A (survey) does not empower any income tax authorities to examine any person on oath, hence any such statement lacks evidentiary value and any admission made during the survey cannot by itself be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is there on record. The AO has merely carved out certain features/modusoperandi of companies indulging in practices not sanctioned by law and as mentioned in such report. However, we note that neither any investigation was carried out against the assessee nor against the brokers to whom the assessee dealt with the purchase and sale of shares in question. Thus the AO has failed to bring on record any material contained in the purported reports which are having so called adverse impact on the assessee. We further find that the company under scanner was having share Capital as on 31.03.2013 of Rs. 13.18 crores and was having assets worth Rs. 24.25 crores and a turn over of Rs. 19.32 crores and profit of Rs. 1.35 crores. Thus the allegation that these companies did not have financial credentials is not correct and so is perverse and therefore we do not subscribe to the said finding and necessarily negate the finding. At the cost of repetition, we find that the transactions of sale of shares by the assessee was duly backed up by material/evidence including contract notes, demat statement, bank account reflecting transactions, the stock brokers have confirmed the transactions (pages ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AO has also not doubted the genuineness of the documents placed by the assessee on record. The AO's observation and conclusion are merely based on information. Therefore on such basis, no disallowance can be made and accordingly we find no infirmity in the order of the ld. CiT(A), who has rightly allowed the claim of the assessee. This ground no.1 of the revenue is dismissed." We agree with the reasoning of the tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested question, in our opinion do not raise any substantial question of law." 9.3. In the light of the documents stated i.e. (i to v) in Page14(supra) we find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got invol....