TaxTMI 
TaxTMI 
2018 (9) TMI 1683
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.... in brief, are that the assessee (HUF) is deriving income from trading in the name and style of M/s Shobhit Goeel HUF and interest income from bank and unsecured loans given to different parties. It filed its return of income on 31.12.2014 declaring total income of Rs. 4,43,870/-. The assessee, in the said return, has claimed exemption of Rs. 19,14,520/- u/s 10(38) of the I.T. Act, 1961 on account of sale of securities. The case of the assessee was selected for scrutiny by CASS on the basis of information uploaded by the Investigation Wing that "Suspicious transaction relating to long term capital gain on sale of shares". After examining the information and written submissions filed by the assessee from time to time and taking into consideration the sworn statements recorded u/s 131 before the Investigation Wing, the Assessing Officer proceeded to complete the assessment. He discussed about the features of Penny Stocks which are as under :- 1. Most of these companies have no business at all. Few of the companies which have some business do not have the credentials to justify the sharp rise in market price of their share. 2. The sharp rise in market price of the sh....
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....who is managing the overall affairs of the scheme and he is the one who contacts the entities who wish to take entry of bogus LTCG/STCG in their books and arranges the same through the scripts of penny stock companies. The Operator manages many paper/bogus companies and uses them to do circular transactions to rig the price of the shares. The shares of these penny stock companies, although listed on exchange, are always closely held and are controlled by the promoter of the Penny Stock Company and the Operator who is arranging for the bogus LTCG/Loss. This is due to the fact that the general public is not interested in these shares as these companies have no credentials and this helps the operator to keep a control and the price movement of the shares. 5. He noted that the Securities and Exchange Board of India (SEBI) has in the recent past, passed some orders on the issue of manipulation of share market for providing accommodation entries. He further noted that the assessee is one such beneficiary who has taken the entry of Rs. 23,18,118/- during the impugned assessment year. From the various details furnished by the assessee during the course of assessment proceedings includin....
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....rchase, sales, STT paid and period of holding are already given. The abstract of transfer of shares in the records of Registrar of Companies (ROC) showing that the shares existed in assessee's name was brought to the notice of the Assessing Officer. The provisions of section 10(38) was also brought to the notice of the Assessing Officer and it was argued that all the provisions of section 10(38) are duly complied with i.e. :- 1. There is transfer of long term assets as per detail given under: - 80 shares of Pinnacle Vintrade Pvt. Ltd. were purchased on 20.10.2011. - 7200 Bonus shares were issued on 23.03.2012. - 72800 shares of Unno Industries allotted in lieu of shares of Pinnacle Vintrade Pvt. Ltd. in a scheme of amalgamation on 12.02.2013. - 72800 shares of Unno Industries sold on 29.04.2013. Since shares allotted in the scheme of amalgamation is not a transfer u/s 47(vi), period of holding was from 20.10.2011 to 27.05.2013 i.e. more than 1 year and hence was a long term capital asset u/s 2(42A). 2. Transaction of sale of equity shares is after Finance (2) Act, 2004. 3. STT has been duly paid as per contract....
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.... entries in the form of share capital, share premium, unsecured loan and LTCG/STCG/STCL through various jamakharchi companies and managed by him including M/s Unno Industries Ltd. The scrip of M/s Unno Industries Ltd. in which the assessee traded has been suspended in trading of securities w.e.f. January 7, 2015 by the SEBI as a "Surveillance Measures". A detailed show-cause notice was issued to the assessee by the Assessing Officer, in response to which, the assessee merely repeated the facts. The assessee has failed to give any concrete evidence of his bona-fide claim during the assessment as well as the appellate proceedings. The assessee has failed to counter the observations and facts cited by the Assessing Officer in para 9 and 10 of the assessment order. The Assessing Officer also provided the assessee an opportunity to attend the Office of DDIT (Inv.), Unit- 4(1), Kolkata vide letter dated 14.12.2016. 11. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :- "1. That order passed by Ld AO dated 23/12/2016 and further order passed by ld CIT A dated 29/01/2018 are bad in law in as much as not....
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....n record which is completely lacking in present case. 7. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the action of ld AO in making addition of Rs. 19,14,520 /- without appreciating that basis of findings of the lower authorities is "suspicion" and "human probabilities" only which is never converted to reliable and trustworthy material and entire assessment order is passed on sole basis of "borrowed satisfaction" and without any independent application of mind. 8. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the action of ld AO in making addition of Rs. 19,14,520 /- without appreciating that no opportunity is given to the assessee to be confronted with back material relied extensively in impugned orders like investigation wing report etc and no opportunity to cross examine the revenue's witness was given despite specific written request in this regard made to Ld AO/CIT-A. 9. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the action of ld AO in making addition of Rs. 19,14,520/- without appreciating that....
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.... vs. Prem Pal Gandhi vide ITA No.95/2017 order dated 16.02.2017, he submitted that under identical circumstances the Hon'ble High Court in the said decision dismissed the appeal filed by the Revenue, wherein, the Tribunal had upheld the order of the ld. CIT(A) in deleting the addition of Rs. 4,11,77,474/- made by the Assessing Officer on account of sham shares transactions. 14. Referring to the following decisions, he submitted that under identical circumstances the various Benches of the Tribunal have deleted such addition made by the Assessing Officer on account of gains from penny stock :- (i) Navneet Agarwal, Legal Heir of Late Kiran Agarwal vs. ITO, ITA No.2281/Kol/2017 order dated 20.07.2018. (ii) Shri Vinay Kumar Sogani vs. Pr.CIT, ITA No.444/JP/2018 order dated 26.07.2018. (iii) Smt. Shikha Dhawan vs. ITO, ITA No.3035/Del/2018 order dated 27.06.2018. (iv) Prakash Chand Bhutoria vs. ITO, ITA No.2394/Kol/2017 order dated 27.06.2018. (v) G.R. Kalra HUF vs. ITO, ITA No.6564/Del/2013 order dated 12.04.2017. 15. He submitted that the Assessing Officer in the instant case has not brought on record any specific transactions or ....
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.... (i) Sanjay Bimalchand Jain, L/H Shantidevi Bimalchand Jain vs. PCIT (ITA No.18/2017). (ii) Chandan Gupta vs. CIT, (2015) 54 taxmann.com 10. (iii) Balbir Chand Maini vs. CIT, (2011) 12 taxmann.com 276. (iv) Usha Chandresh Shah vs. ITO [2014-TIOL-1459-ITAT-MUM]. (v) Ratnakar M. Pujari vs. ITO [2016-TIOL-1746-ITAT-MUM]. 17. I have considered the rival arguments made by both the sides and perused the material available on record. I find the assessee in the instant case has claimed long term capital gain of Rs. 19,14,520/- u/s 10(38) on account of sale of 72,800 shares of M/s Unno Industries Ltd. It may be pertinent to mention here that the assessee had purchased 80 shares of M/s Pinnacle Vintrade Ltd. on 20.07.2012 on which bonus were announced @ 90:1 i.e. 7200 bonus shares were given. On the basis of scheme of arrangement ordered by the Hon'ble Bombay High Court on 18.01.2013 one share of Pinnacle Vintrade Ltd. was replaced by 10 shares of M/s Unno Industries Ltd. Accordingly 7280 shares were converted into 72800 shares of succeeding company. I find the Assessing Officer rejected the claim of long term capital gain on account of sale of ....
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....e assessee, in the case of Prem Pal Gandhi (supra) has observed as under :- "2. The following questions of law have been raised:- (i) 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. 4,11,77,474/- made by the AO on account of sham share transactions ignoring an important aspect that the transaction of shares showing their purchase price at Rs. 11,00,000/- and sale consideration at Rs. 4,23,45,295/- within a period of less than two years/purchases of shares made in cash not cheque that too before shares got dematerialized/worth of the company at the time of purchase/sale of shares not proved-All suggest non-genuineness of the said transaction? (ii) 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. 4,11,77,474/- made by the AO on account of sham share transactions, whereas the CIT(A) himself had held that the assessee had not been able to substantiate the source of investment of Rs. 11,00,000/....
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.... Exchange was manipulated in any manner. 5. In these circumstances, following the judgement in ITA-18-2017, it must be held that there is no substantial question of law in the present appeal. 6. Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no corelation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises. 7. In the circumstances, the appeal is dismissed." 20. I find the Co-ordinate Bench of the Tribunal in the case of Smt. Shikha Dhawan (supra) has deleted similar addition by observing as under :- "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 d....
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....f exemption claimed u/s 10(38) of the Act. 9. Keeping in view of the above discussion and the material on record, in the light of the order of the Tribunal in the case of Meenu Goel vs ITO (supra), I set aside the orders of the authorities below and delete the addition of Rs. 19,51,357/-. The appeal of the assessee is, accordingly, allowed. 10. In the result, the appeal of the assessee is allowed." 21. I find the Kolkata Bench of the Tribunal in the case of Prakash Chand Bhutoria (supra) has dealt with identical issue where the long term capital gain on account of sale of shares of M/s Unno Industries Ltd. was denied by the Assessing Officer on the basis of Investigation Wing of Kolkata and the ld. CIT(A) upheld the action of the Assessing Officer. On further appeal by the assessee, the Tribunal deleted the addition made by the Assessing Officer u/s 68 by observing as under :- "8. A perusal of the order of the AO demonstrates that this addition was made merely on "suspicion" and in a routine and mechanical manner. This is clear from the fact that the AO refers to some 'Sharp Trading Compnay' as one of the main ,manipulated company and whereas t....
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....ons from 01.04.2004 to 31.03.2005 i.e. relevant for the assessment year under appeal (2005-06) are before us. There cannot be any doubt about the transaction as has been observed by the assessing officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through demat format. Hence, we agree with the given findings of the ld. Commissioner of Income Tax (Appeals) in accepting the transactions as genuine too. In view of the fact findings we cannot reappreciate, recording is such, cannot be said to be perverse as it is not fact finding of the ld. Tribunal alone. The commissioner of Income Tax came to the same fact finding. Concurrent fact finding itself makes the story of perversity, unbelievable." The "D" Bench of the Kolkata Tribunal in the case of Gautam Kumar Pincha vs. ITO, in I.T.A. No. 569/Kol/2017 dated 15.11.2017 at para 19 onwards held as follows: (i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) - In this c....
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....ers 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 AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. (vi) 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 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 by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Cour....
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....620 of 2008 is dismissed." 8.5. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition. 9. In the result the appeal of the assessee is allowed." The "A" bench of the Kolkata Tribunal in the case of ITO vs. Shaleen Khemani in I.T.A. No. 1945/Kol/2014 dated 18.10.2017 at para 9.1. to 9.4 held as follows: 9.1 We further find that the transaction of sale of shares by the assessee was duly backed by all evidences including Contract Notes, Demat Statement, Bank Account reflecting the transactions, the Stock Brokers have confirmed the transactions, the Stock Exchange has confirmed the t....
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....that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held - "As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs. 25,30,396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee. Thus 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 questions, in our opinion do not raise any substantial questio....