TaxTMI 
TaxTMI 
2017 (11) TMI 1150
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.... The AO noted that the assessee had purchased 400 shares of Ms Quick Management Services Ltd in FY 2010-2011 for a consideration of Rs. 1,00,000 and against these shares as a result of a scheme of amalgamation, the assessee got 6400 shares of M/s BSR Finance & Construction Ltd and this entire shares were sold during FY 2012-2013 for a consideration of Rs. 12,29,111. The AO also found that the assessee had purchased 200 shares of M/s Gravity Barter Ltd for a consideration of Rs. 1,00,000/- in FY 2010-2011 and as and against these shares as a result of a scheme of amalgamation, the assessee got 8800 shares of M/s Oasis Cine Communication Ltd (which was renamed to Ecowave Infotech Ltd) and part of this i.e. 5800 shares were sold during FY 2012-2013 for a consideration of Rs. 18,94,780 and this resulted in long term capital gains of Rs. 29,57,981. 4. The AO took note of the fact that the gain made by the assessee in the transaction of the sale of shares was very high during a short period of time and as per the AO, both the Companies i.e. BSR Finance & Construction Ltd and Oasis Cine Communication Ltd (which was renamed to Ecowave Infotech Ltd) were bogus companies and therefore, th....
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.... on sale of shares. The documentary evidences included the following: (i) Balance Sheet of the assessee for FY 2010-2011 wherein the investment of Rs. 2,00,000 made in shares were duly recorded and reflected. (ii) The Bills for purchase of the shares of Ms Quick Management Services Ltd (iii) The Bills for purchase of the shares of Ms Gravity Barter Ltd (iv) The bank statement of the maintained with South Indian Bank Ltd reflecting the payment of Rs. 2,00,000 to purchase the shares of Ms Quick Management Services Ltd and Ms Gravity Barter Ltd (v) The documents relating to the merger of Ms Gravity Barter Ltd with Oasis Cine Communication Ltd approved by the Hon'ble Calcutta High Court in the CA 519 of 2011. (vi) The documents relating to the merger of Ms Quick Management Services Ltd with BSR Finance & Construction Ltd approved by the Hon'ble Calcutta High Court in the CA 575 of 2011. (vii) The letter of allotments for the share held in Ms Quick Management Services Ltd and exchanged with the shares of BSR Finance & Construction Ltd in terms of the ratio as approved by the Hon'ble Calcutta High Court in the CA 575 of 2011.....
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....d AR submitted that the evidences and documents furnished by the assessee were neither found to be false nor fabricated. The ld AR submitted that the AO doubted the genuineness of the sale transactions on the basis of some purported orders of SEBI and/or the Investigation Wing however the AO has merely mentioned the date of a letter issued by the Director of Investigation. Save and except the date of the letter, according to ld AR, there is nothing brought on record by the AO, as to how that investigation report concern the assessee and or the shares sold by the assessee. According to ld AR, the AO could not even bring on record any finding or material against the assessee or the Companies in which the assessee had dealt with or the stock brokers through whom the shares were sold. The ld AR submitted that the AO on pages 6-9 of the assessment order had merely stated that the Investigation Wing and SEBI conducted some inquiries in respect of some other Companies and as per the report prepared by them, certain patterns and features were identified by them and as per the AO such patterns and features were emerging in the case related to the Companies in which the assessee dealt with. ....
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....ordinary investor could invest in the company. The ld AR drew our attention to the fact that the sale of shares was made on the online platform of the stock exchange; therefore according to ld AR, the assessee did not know the names of the buyers and has no connection and/or relations with any such persons. The transactions of sale of shares were online trading system through his broker from whom he received the sale consideration. The broker also receives payments for all his transactions from Stock Exchange. The seller and the buyer cannot know the names of each other as well as their respective brokers, who were involved in the trading transactions in the secondary platform. In such a situation according to ld AR, it cannot be presumed that there could be any transfer of cash between the buyers and sellers to convert the unaccounted money of the beneficiaries as alleged by the AO. The ld AR referred to the judgement of Hon'ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd. [2017] 83 taxmann.com 161 (Bom) to contend that there was no evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the allege....
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....a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee . 6.4 The ld AR submitted that there is no direct evidence against the assessee brought on record by AO to hold that the assessee introduced his own unaccounted money by way of bogus LTCG. The ld AR submitted that although various investigations were carried out by different agencies, there is no evidence against the assessee and/or the brokers and/or the Companies in which the assessee dealt with to hold that the assessee was a beneficiary to the modus operand....
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.... possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. (iii) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) - In this case the Hon'ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI's action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) - In this case the Hon'ble Calcutta High Court affirmed the decision of this tribunal, wherein, the tribunal allowed the appeal of the assessee where the AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the AO disallowed the loss on ....
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.... Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (v) Rita Devi & Others vs. DCIT - IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vi) Surya Prakash Toshniwal vs. ITO - ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (viii) Ms. Farrah Marker vs. ITO - ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal vs. ACIT - ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT vs. Sudeep Goenka - [2013] 29 taxmann.com 402 (Allahabad HC) (xi) CIT vs. Udit Narain Agarwal - [2013] 29 taxmann.com 76 (Allahabad HC) (xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xiii) CIT vs. Himani M. Vakil - [2014] 41 taxmann.com 425 (Gujarat HC) (xiv) CIT vs. Maheshchandra G. Vakil - [2013] 40 taxmann.com 326 (Gujarat HC) (xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) Ganeshmull Bijay Singh Baid HUF vs. DCIT - ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta & Others vs. ACIT - ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITA....
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....2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT - [2006] 6 SOT 247 (Mum) 6.9 The ld AR also submitted that the AO was not justified in disallowing the assessee's claim of exemption under section 10(38) of the Act by concluding that the transactions of the assessee resulting in LTCG on sale of shares were bogus relying on the statements of various persons recorded by Investigation Wing wherein these persons accepted to have provided accommodation entries of various natures including LTCG to different persons. The ld AR submitted that in the statement of third parties, the name of the assessee was not implicated. Even otherwise, no adverse inference could be taken 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 Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (iii) ACIT vs. Amita Agarwal & Others - ITA No. 247/(Kol) of 2011 (Kol ITAT) (iv) ITO vs. Bijaya Ganguly - ITA Nos. 624 & 625/Kol/....
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....h was renamed to Eco Wave Infotech Ltd); and when part of this i.e. 5800 shares were sold during the financial year 2012-13 received a consideration of Rs. 18,94,780/- and this resulted in long term capital gain of Rs. 29,57,981/-. We take note that in support of the transactions of the purchase, merger and sale of shares leading to capital gains, the assessee has submitted the following documents :- i)The balance sheet of the assessee for the financial year 2010-11 wherein the investment of Rs. 2 lakhs made in shares were duly recorded and reflected; ii) The bills for purchase of shares of M/s. Quick Management Services Private Limited; iii) Bills for purchase of shares of M/s. Gravity Barter Limited; iv)The bank statements maintained with South Indian Bank Ltd. Reflecting the payment of Rs. 2 lakhs to purchase the shares of M/s. Quick Management Services Private Limited and M/s. Gravity Barter Limited; v)The documents relating to the merger of M/s. Gravity Barter Limited with M/s. Oasis Cine Communication Limited approved by the Hon'ble Calcutta High Court in CA No.519 of 2011; vi) The documents relating to the merger of M/s. ....
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....evant evidences, the action of the AO and CIT(A) was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances and human conduct and preponderance of probability against the assessee. For that we rely on the decision of the Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. Vs ACIT (supra) for this proposition. The various facets of the contention of the ld. AR(supra), to rope in the assessee and for drawing adverse inferences, which remain unproved based on the evidence available on record are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the ld. AR are also not reiterated for the sake of brevity. 8.2. It is to be kept in mind that the assessee acquired more shares as a result of the scheme of amalgamation which was approved by the Hon'ble Calcutta High Court and the authorities below should not have simply brushed aside the order of the Hon'ble Calcutta High Court approving the merger and as a consequence to the merger, the shares were issued and hence the acquisition of shares cannot be disputed on this score alone and are to be held as properly explained. It....
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.... and was having assets worth Rs. 52.29 crores and a turnover of Rs. 6.97 crores as against the turn over of Rs. 2.01 crores as on 31.03.2012. Thus the allegation that these companies did not have financial credentials is factually incorrect and on the facts narrated above makes the order of the AO perverse and this finding of the AO is held to be erroneous. At the cost of repetitions, we find that the transactions of the sale of shares by the assessee was duly supported by relevant evidences including contract notes, demat statement, bank account reflecting the transactions, stock brokers have confirmed the transactions, the stock exchange have confirmed the transactions, the shares have 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 there was any material/ evidence to prove that the assessee or any one on his behalf ha....
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....antial question of law. 8.4. In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered 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 supported with material evidences which are on record and could only rely on the orders of the AO/CIT(A). We note that in the absence of material/evidence the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore also 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. These evidences were neither found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that th....