TaxTMI 
TaxTMI 
2017 (11) TMI 1075
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....ssee 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- 2010 there was a preferential allotment of the s....
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....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 in ITA No. 19/Kol/2014 dated 2.12.2016. The transactions were all through account payee cheques and re....
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....ption 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 the aforesaid submissions:- (i) Andman Timber Industries vs. CCE - [2015] 62 taxmann.com 3 (SC) (ii) ITO vs. Ashok Kumar Bansa....
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.... 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 transactions were bogus. The Hon'ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported b....
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....gh 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 and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., the transactions of purchase of shares were accepted by the AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of S....
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....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 the decision of the Ld CIT(A) and the AO and urged before the bench not to interfere with the order of the Ld CIT (A). 9. We have heard the rival submissions and perused the records. We note that in the present case, the appellant had purchased 13500 shares of M/s. Tuni Textile Mills Private Limited on 06.04.2011 from a stock broker in off-market transactions from M/s Badri Prasad & Sons, who was a member of ....
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....oker 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 made the basis of addition. We therefore hold that the statement of Shri N.P.Surekha recorded on oath during the survey proceedings cannot be the sole basis to make the impugned addition. We note that the assessee had not purchased the shares by the Preference Share Route as stated by the party before the survey party. The allotment made in preference share was on 25-01-2010, whereas the assessee purchased the sha....
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....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 24-25 of the paper book), the shares having been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless....
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....ny 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 involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The....