TaxTMI 
TaxTMI 
2018 (8) TMI 276
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....that assessee filed her return of income for assessment year under appeal on 30.07.2014 declaring total income of Rs. NIL. This case was taken up for scrutiny under CASS with main reason for selection being to examine the source of suspicious long term capital gain claimed exempt from taxation under section 10(38). During the assessment proceedings, it was noticed that the assessee has claimed Long Term Capital Gains of Rs. 46,63,728/- on sale of shares of following companies. Name of the Company Sale Price Purchase Price Transfer Expenses Exempt U/s. 10(38). HPC Biosciences Ltd. 23,23,548/- 25,000/- --- 22,99,548/- Esteem Bio Organic & Food Processing Ltd., 25,66,716/- 1,50,000/- --- 24,16,716/- Total 47,16,264/- 2.1. The A.O. issued show cause notice and asked the assessee to furnish supporting documents and to explain such an exponential rise in the price of shares in merely 13- 14 months that too without any positive indication in the basic fundamentals or earnings of the companies in which assessee have made investment and asked the assessee as to....
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.... credit of sale proceeds. Learned Counsel for the Assessee further submitted that in the case of M/s. Esteem Bio Organic & Food Processing Ltd., these shares were directly purchased from company in preceding A.Y. 2013-2014 in IPO. Purchases is not doubted which is through banking channel. The purchase is proved through share application form of IPO, copy of the cheque issued for IPO allotment, allotment letter, copy of Demat account showing IPO and bank statement showing payment of Rs. 1,50,000/- The sales stand proved through broker note dated 06.03.2014, 07.03.2014 and 10.03.2014. The transaction statement for sale of shares through Demat account supported by ledger account in books of broker and bank statement showing credit of sale proceeds, all the documents are filed in the paper book. Learned Counsel for the Assessee submitted that shares have been purchased through banking channel and through Demat account through broker/recognized stock exchange. Sales are subjected to STT. Sales have been made after retaining the same for a period of more than 12 months. All the shares are of listed company registered in stock exchange. The purchase and sales are at prevailing market pric....
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....nst the order of Ld. CIT(A)-1, Gurgaon dated 09.03.2018 for AY 2014-15 on the following grounds:- 1. "That the learned Commissioner of Income Tax (Appeals) 1, Gurgaon has further grossly erred both in law and, on facts in denying the claim of exemption of long term capital gain of Rs. 19,39,357/- on sale of shares sold on recognized stock exchange and, eligible for exemption u/s 10(38) of the Act and bringing to tax as unexplained credit u/s 68 of the Act. 2. That learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in making an addition of Rs. 19,51,357/- being sale consideration on sale of shares listed on recognized stock exchange as unexplained credit u/s 68 of the Act. " 2.1. That while sustaining the aforesaid addition and denying the exemption learned Commissioner of Income Tax (Appeals) has failed to appreciate that, appellant was owner of equity shares of a listed company which had been held by it for a period exceeding 12 months and the same were sold on recognized stock exchange after payment of STT, resulting into a long term capital gain and therefore the long term capital gain accrued to the assessee on transf....
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....d by the learned Commissioner of Income Tax (Appeals) are factually incorrect and contrary to record, legally misconceived and untenable. 2.9 That the learned Commissioner of Income Tax (Appeals) has erred in concluding without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the penny stock. 3 That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not allowing depreciation of cost incurred on purchase of shares and sold by the appellant in the next year. It is therefore, prayed that it be held that exemption denied and addition made and sustained by the learned Commissioner of Income Tax (Appeals) may kindly be deleted and appeal of the appellant be allowed." 2. I have heard Ld. Representatives of both the parties and perused the findings of the authorities below. In all the grounds of appeal, the assessee challenged the addition of Rs. 19,51,357/- u/s 68 of the Income Tax Act, 1961 (in short "Act"). 3. Brief facts of the case are that return declaring income of Rs. 5,31,370/- was filed on 18.11.2014. In this return the assessee ....
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....t. Limited, which the assessee purchased, was involved in providing bogus accommodation entries in the shape of bogus Long Term Capital Gains. " 3.1. All these facts were brought to the notice of the assessee by the Assessing Officer in the show cause dated 19/12/2016 and the appellant was asked to explain why transactions may not be held to be accommodation entry. The Assessing Officer also referred to the Investigation conducted by the Investigation Wing Kolkata and particularly referred to the statements of Sh.Anil Kumar Khemka recorded u/s 131 of the Act wherein it was stated by these persons that M/s Turbo Tech Ltd was used for the purpose of providing accommodation entries. After considering the facts of the case and the submissions of the assessee, the Assessing Officer held that the transaction was a accommodation entry and in this regard observed as under:- "9.1. The assessee sold the shares on 30.07.2013 & 31.07.2013 (500+5500=6000) through the broker M/s Indus Portfolio Pvt. Ltd, for a total sale consideration of Rs. 19,53,372/- for which the shares were dematerialized only on 11.06.2013. It is thus evident that just a few days prior to the date of sale....
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....within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year; the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. To reiterate, the burden of proof, cast upon the assessee to prove that the claim of long term capital gain as exempt u/s 10(38), is not discharged in the instant case. " 3.2. The Assessing Officer referred to all the aforesaid facts and held that LTCG amounting to Rs. 19,39,357/- was unaccounted income of the assessee and added the same to the total income of the assessee u/s 68 of the IT Act. The Assessing Officer further held that the tax on these additions would be charged as per section 115BBE of the IT Act. 4. The assessee challenged the addition before Ld.CIT(A) and filed a written submission which is reproduced in ....
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....so enclosed copy of some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the order which is not very legible, seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and sold them in year 2013. It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. 5. Documents incorporated by the Ld. AO in the assessment order at Page 20 to 22 are not at all legible. Therefore appellant is not in a position to comment on these documents. 6. Ld. AO has raised objection regarding the cash purchase of shares and that shares were dematerialize few days back only from the date of sale. In this regard, it is to submit that there is no law which prohibits the purchase of shares in cash. Appellant filed copy of bills of purchase, copy of share certificates and transfer forms etc. before Ld. AO and no adverse inference could be drawn only because the shares were purchased in cash. Regarding Demat of shares, it is to submit that it is the option of the buyer of shares to keep the shares either....
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....Kamla Devi S Doshi, ITAT Mumbai Bench in ITA No. 1957/Mum/2015 Surya Prakash Toshniwal, ITAT Kolkata Bench in ITA No. 1213/Kol/2016 Sunita Jain, ITAT Ahmedabad Bench in ITA No. 501 & 502/Ahd/2016 Pratik Suryakant Shah, 77 taxmann.com 260 (Ahmedabad-Trib) Copy of all these judgements are enclosed herewith. 12. Ld. AO also erred in' making addition u/s 68 of the Act, although the impugned addition should not be made under this section. As per the requirement of law, appellant need not to maintain any books of accounts and in absence of books of accounts, no addition could be made U/S 68 of the Act. 13. That the GOA No.5 is regarding issuance of notice u/s 143(2), which was issued by the ITO, Ward-27(4), New Delhi. ITO, Ward-27(4), New Delhi has no jurisdiction over the case of the appellant and hence notice issued was without jurisdiction and invalid. In view of above submission, it is prayed that all the additions made may kindly be deleted & the appeal of the appellant may kindly be allowed & oblige." 5. Ld.CIT(A) considering the explanation of the assessee and material on record, not only confirmed the addition of ....
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....s not supported by the fundamentals of the company. 3.6. To fully appreciate the issue at hand it is relevant to take notice of these commonly known notorious facts about the modus operandi of converting the unaccounted funds through willing dubious entities. Reference in this regard can also be made to the following decisions:- (a) CWT v, Rohtas Industries Limited, 67 ITR 283 (SC), wherein it was held that- "In the absence of any direct evidence, a judicial or quasi-judicial Tribunal can base its conclusions on the basis of what are known as notorious facts bearing in mind the principles of Section 144 of the Evidence Act." (b) Attar Singh Gurmukh Singh v. ITD,"191 ITR 667 (SC), wherein, while interpreting the provisions of Section 40A(3), it was held that- "In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under. circulation in our country." 3.7. It may now be relevant to refer to the various facts which emerge from the assessment order-and the submission of the appellant which are as under:- i) The appellant purchased 10,000 shares of M/s Turbo Tech Ltd for a....
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....bill such as Order No, Trade No. & Trade Time was left blank. 3.9. As per appellant's own version, the shares were purchased M/s Shree Ji Broking Pvt Ltd on 22.11.2011 directly in cash and not through recognized stock exchange. Moreover, as per the documents on record the shares were purchased in the name of appellant on 22.11.2011 whereas the payment of the same as made only on 24.11.2011. Thus as per the facts on record the shares were purchased in the name of the appellant even before the payment was made. Further, from all the aforesaid facts, it is evident that the meager investment of Rs. 6,000 made by the appellant on 22.11.2011 went up to more than Rs. 19 lakhs within a period of 24 months. Such a steep rise in value of investment is not within the realm of human probability. In these circumstances, it is evident that the transaction was as an arranged affair between the appellant and the accommodation entries providers and this fact has been duly admitted by Sh. Anil Kumar Khemka and Nikhil Jain referred to above. From the facts discussed above it is evident that M?s Turbo Tech Ltd was being used for the purpose of providing entry of long term capital gains by....
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....dinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More 82 ITR 540 held as under: "It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbehevable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. " 3.13. Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be nongenuine. It is highly improbable that share price of a non descript company can go up by almost 50 times, in a short span of time. The taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in those doc....
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....xpenditure claimed to have been incurred in the earlier years is therefore not genuine and cannot be claimed and allowed as expenditure during the current year. The addition made by AO is accordingly enhanced to Rs. 19,51,357/-. 3.18. In the result the appeal of the appellant is dismissed with enhancement as above." 6. Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that an inquiry conducted in the cases of other assessees and statements referred to by the AO in the assessment order have not been confronted to the assessee. The assessee has not been named by any of these persons for indulging in taking accommodation entries. He has, therefore, submitted that such evidence cannot be read in evidence against the assessee and relied upon the decision of the Hon'ble Supreme Court in the case of Kishan Chand Chela Ram 125 ITR 713 (SC). He has submitted that for claiming exemption u/s 10(38) of the Act, the assessee shall have to prove twin conditions i.e. the income arise from the transfer of long term capital asset and being equity share in a company where the transfer of sale of such equity share is entered into....
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....h includes a copy of purchase bill dated 22.02.2010; a copy of share transfer form in the favour of the assessee; Copy of bank statement highlighting the payment made against the share purchased; Transaction statement of the stock broker i.e. Pace Stock Broking Services (P) Ltd., account; copy of bank statement in which sale proceed from the sale of shares received; copy of calculation of long term capital gain, which was not faulted by the AO. However, the lower authorities have not considered the aforesaid documents and rejected all the claims made by the assessee by relying on the report of the Investigation Wing and thereby made the addition, which is not sustainable in the eyes of law. I further find that the AO has given detailed explanation in the order regarding the modus operandi of bogus LTCG scheme but failed to substantiate how the assessee fell in the purview of the same without bringing any material on record and proving that the assesssee was directly involved in the so called bogus transaction. I further note that the addition in dispute made by the AO and upheld by the Ld. CIT(A) u/s 68 as unexplained credit instead of long term capital gain as claimed by the asses....
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....during the financial year 2005-06 and the AO was directed to reopen the case of the assessee for the assessment year 2006-07 on this issue? (iii) Whether the Hon'ble ITAT has erred in ignoring an important aspect that in such cases of sham transactions of shares showing abnormal hike in their value, where the facts themselves speak loud and clear, the AO is justified to even draw an inference from the attendant circumstances? (iv) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of Rs. 12,59,000/- made by the AO on the basis of seized document on the grounds that the AO has not pointed out as to how the figures of Rs. 12.59 lacs has been worked out ignoring the fact that the assessee himself in his reply to the AO had tried to explain the source of the receipts of Rs. 12,59,000/- instead of challenging the working out of the said figure by the AO? 3. The first three questions of law raised in this appeal are covered against the appellant by an order and judgment of a Division Bench of this Court dated 16.02.2017 in ITA-18-2017 ti....
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....entered into genuine transaction, therefore, no addition u/s 68 of the Act be made against the assessee. 7. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below. 8. I have heard the rival submissions and perused the material available on record. The assessee placed sufficient documentary evidences before the AO which are copy of the shares certificates with transfer form, copy of debit note issued by Shreeji Broking (P) Ltd., copy of cash receipt of Shreeji Broking (P) Ltd., copy of the account statement of the assessee in the books of the broker, copy of ledger account of Indus Portfolio (P) Ltd., copy of evidence for payment of securities transaction tax and copy of the bank statement of the assessee to show that the assessee had entered into genuine transaction of purchase of share which were later on sold through the broker on recognized stock exchange after payment of STT. The claim of the assessee for sale of shares has been supported by the documentary evidences which have not been rebutted by the authorities below. Whatever inquiry was conducted in the cases of other parties and statement recorded of several persons namely Sh. Anil....