TaxTMI 
TaxTMI 
2018 (10) TMI 1431
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....nresident Indian settled in United Kingdom. She derived income in India from commodity trading, long term capital gains on account of sale of shares and mutual fund units and received interest income from bonds and bank deposits. The assessee claimed carry forward of Long Term Capital Loss on Mutual Fund to the tune of Rs. 2,07,522/-and exempt income u/s 10(38) of the Act on account of long term capital gains (LTCG in short) of Rs. 74,86,600/- on sale of listed equity shares of Kailash Auto Finance Ltd (KAFL) which was also subjected to Securities Transaction Tax (STT) and transactions routed through recognized stock exchange. The ld AO observed that the assessee acquired 200000 equity shares of face value of Rs. 10/- each of M/s Careful Projects Advisory Limited (CPAL in short) at Re. 1/- each totaling to Rs. 2,00,000/- on 14.2.2012 through off market purchase from M/s Sanskriti Vincom Pvt Ltd (PAN - AAPCS2061P) , 4, Raj Sir Radha Kanta Deb Lane, Shyampukur, Kolkata - 700005. The payment of Rs. 2,00,000/- for the same was made by account payee cheque by the assessee in favour of M/s Sanskriti Vincom P Ltd and the cheque got cleared in the bank account of the assessee on 16.2.2012....
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....uity shares of CPAL (pre-merger) and KAFL (post merger) . He argued that the shares were sold by the assessee based on the prevailing market prices in the stock exchange in the open market on which the assessee does not have any control. He argued that there is no evidence brought on record by the revenue to prove that the concerned scrip was involved in artificial price rigging at the behest and connivance of assessee together with his broker and the stock exchange and some entry operators. He argued that the Hon'ble Punjab & Haryana High Court (Chandigarh Bench) in the case of PCIT vs Sh Hitesh Gandhi in ITA No. 18 of 2017 dated 16.2.2017 on the aspect of huge increase in share sale price had observed in the similar circumstances and decided in favour of the assessee. He placed reliance on the co-ordinate bench decision of Mumbai Tribunal in the case of Mukesh R Marolia vs Additional CIT reported in (2006) 6 SOT 247 (Mum.) dated 15.12.2005 wherein it was held as under:- 10.7 Therefore, we find that the explanations of the assessee seems to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling tha....
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....ified in holding that the amount of Rs. 1,41,08,484/- represented unexplained investment under section 69 of the Income Tax Act, 1961 cannot be faulted. 8. In the result, we see no merit in this Appeal and the same is dismissed with no order as to costs. The ld AR also placed on record the evidence for dismissal of Special Leave Petition (SLP) of the Revenue by the Hon'ble Apex Court in SLP No. 20146/2012 dated 27.1.2014 against the decision of the Hon'ble Bombay High Court supra. 5.1. The ld AR further placed reliance on the co-ordinate bench decision of this tribunal in the case of Manish Kumar Baid & Ors vs ACIT in ITA Nos. 1236-1237/Kol/2017 dated 18.8.2017 wherein the scrip of KAFL had been dealt under similar circumstances and relief granted to the assessee. He also argued that the SEBI in its final order dated 21.9.2017 on the investigation of KAFL shares had revoked the ban and restraint orders issued on 244 entities and persons which formed the very basis of the ld AO for framing the addition and making various allegations against the assessee herein. 6. The ld DR on the other hand vehemently supported the interim order of SEBI dated 29.3.2016 and share price movement....
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....sold, price at which it was sold, STT collected, brokerage collected, service tax collected, trade time, date of sale, settlement number, net amount payable to seller through the stock exchange ( enclosed in pages 40 to 49 of Paper Book) ; b) Bank Statements of the assessee for the period 1.8.2013 to 28.1.2014 maintained with Axis Bank wherein the sale proceeds of sale of shares on different dates were credited (enclosed in page 50 of Paper Book) c) Demat Statement of the assessee in respect of various scrips including the scrip of KAFL containing the number of shares held in each scrip after each sale (enclosed in Pages 51 to 52 of Paper Book). 7.4. With regard to the arguments of the ld DR that at the time of purchase of shares of CPAL by the assessee, the shares of KAFL were very much available in the stock market and the assessee could have very well bought the shares of KAFL from the open market. He need not have resorted to purchasing the shares of CPAL and later on get it merged with KAFL. In this regard, we find from the materials available on record, that the assessee was not the director or promoter of either M/s CPAL or KAFL prior and post merger. Assessee was only ....
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....d the issue in favour of the assessee. We find that the ld DR also placed reliance on the decision of Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain vs PCIT, Nagpur & Another in ITA No. 18 / 2017 dated 10.4.2017 which is also a non-jurisdictional High Court decision. In these circumstances, the Hon'ble Apex Court in the case of Vegetable Products had held that when there are conflicting views on an issue for and against the assessee by the different non-jurisdictional high courts, the construction which favours the assessee should be followed. Accordingly, the decision of Hon'ble Punjab & Haryana High Court supra would have to be followed in the instant case before us. 7.6. We also find that the entire issue with regard to sale of shares of KAFL had been the subject matter of adjudication by this tribunal in the case of Manish Kumar Baid & Others vs ACIT in ITA Nos. 1236-1237/Kol/2017 dated 18.8.2017, wherein the arguments of the assessee and the decision rendered by this tribunal are as under:- 5. The ld AR argued that the ld CIT(A) erred in confirming the addition made by the ld AO on the basis of the aforesaid findings and vario....
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....r found to be false nor fabricated. The ld AR submitted that the ld AO doubted the genuineness of the sale transactions on the basis of various orders of SEBI and/or the Investigation Wing and the statements of various persons recorded by Investigation Wing in the cases of persons unconnected to the assessee. It was submitted that the ld AO disallowed the assessee's claim of LTCG on sale of shares of KAFL on suspicion and presumptions alone. It was submitted that the lower authorities have not brought any material or evidence on record to falsify the claim of the assessee or to hold that the share transactions were bogus. 5.2. The ld AR has shown that the three orders of SEBI and the report of the Investigation Wing and/or the statements of different persons recorded by Investigation Wing nowhere named the assessee as a beneficiary to the transactions relating to KAFL. It is seen from the Interim Order dated 29th March, 2016 that SEBI has listed the names of various entities/persons who were the promoters and/or the connected or related parties provided bogus transactions of LTCG to various beneficiaries. The list of the names of the beneficiaries was also given in the said order....
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....ial year i.e. 2011-12. He concluded that in such circumstances, the merger of the two companies with KAFL could not be said to be a premeditated arrangement to give benefit of LTCG to beneficiaries. At least a gullible investor would be lured to make investment in such companies. 5.6. The ld AR also brought to our notice the Financials of KAFL reported in SEBI's interim order dated 29th March, 2016 to show that the Price Earnings Ratio (in short P/E ratio) of that Company increased to Rs. 4,065 in FY 2013-14 from Rs. Nil in the FY 2012-13. The ld AR stated that the conclusion drawn by ld AO that the financials of the company shows Nil P/E ratio and did not give rise to steep increase of market price of the shares of KAFL, is contrary to the facts on record. 5.7. The ld AR also referred to the statement of Sri Sunil Dokania relied on by the ld AO to draw adverse inference against the assessee. He referred to the following statement against Q. No. 15 :- Q.15 Please explain the modus operandi of getting bogus long term capital gain through scrips controlled and managed by you. Ans. Generally beneficiaries approached to the broker/entry operator in search of generation of Capit....
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....s to convert the unaccounted money of the beneficiaries as alleged by the ld 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 alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. In the said case, the Hon'ble High Court at Para 21 held that in absence of any material to show that huge cash was transferred from one side to another , addition cannot be sustained. Similar view was taken in the following cases:- (i) Baijnath Agarwalla vs. ACIT [2010] 40 SOT 475 (Agra Third Member) (ii) Ganeshmull Biijay Singh Baid HUF vs. DCIT - ITA No. 544/Kol/13 dated 4.12.2015 (Kolkata Tribunal) (iii) Malti Ghanshyambhai Patodia vs. ITO - ITA No. 3400/Ahd/2015 (Ahmedabad Tribunal) (iv) Pratik Suryakant Shah vs. ITO -[ 2017] 77 taxmann.com 260 (Ahmedabad Tribunal) (v) Padduchari Jeevan Prashant vs. ITO - ITA No. 452/Hyd/2015 (Hyderabad Tribunal) (vi) Anil Nand Kishore Goyal vs.ACIT - ITA Nos. ....
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....ed by the ld AO to be the SEBI's orders is no evidence against the assessee for the reasons stated earlier. The ld AR submitted that although various investigations were carried out by different agencies, there is no evidence against the assessee to hold that the assessee was a beneficiary to the modus operandi adopted by different entities / brokers / entry operators. The ld AR submitted that, in view of the aforesaid judgement of Special Bench of Hon'ble Mumbai Tribunal, various judgements relied on by the ld AO against the assessee are irrelevant in as much as the said judgements are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record. 5.11. The ld AR vehemently submitted that the assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the ld AO in the year of its acquisition and thereafter until the same were sold. The off market transaction for purchase of shares of CPAL is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. IT....
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....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. (v) 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. (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 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....
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.... assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon'ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon'ble Apex Court held that the burden 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. The ld AR submitted that similar view has been taken in the following judgements while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny Socks. (i) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C....
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....ia vs. ITO - ITA No.3400/Ahd/2015 (Ahmedabad ITAT) (viii) Pratik Suryakant Shah vs. ITO - [2017] 77 taxmann.com 260 (Ahmedabad ITAT) (ix) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (x) Atul Kumar Khandelwal vs. DCIT - ITA No. 874/Del/2016 (Delhi ITAT) (xi) Farah Marker vs. ITO - ITA No. 3801/Mum/2011 (Mumbai ITAT) 5.16. The ld AR also submitted that the ld AO was not justified in invoking the provisions of section 68 of the Act to hold that the sale proceeds of shares of KAFL received by the assessee from M/s Ashika Stock Broking Ltd. was not satisfactorily explained by the assessee. There is no evidence on record to disbelieve that the assessee sold shares of KAFL through M/s Ashika Stock Broking Ltd., a registered share and stock broker with BSE. The assessee produced all evidences to explain the source of the amounts received by the assessee from M/s Ashika Stock Broking Ltd. The ld AO was not justified in assessing the sale proceeds of shares of KAFL as unexplained cash credit under section 68 of the Act. 5.17. The ld AR submitted that on the facts and circumstances of the case and on the basis of incontrovertible evidences produced by the ass....
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....f KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the lower authorities apart from placing the copy of SEBI's interim order supra. We find that the SEBI's orders relied on by the ld AO and referred to him as direct evidence against the assessee did not contain the name of the assessee and/or the name of Ashika Stock Broking Ltd. through whom the assessee sold the shares of KAFL as a beneficiary to the alleged accommodation entries provided by the related entities / promoters / brokers / entry operators. In the instant case, the shares of CPAL were purchased by the assessee way back on 20.12.2011 and pursuant to merger of CPAL with KAFL, the assessee was allotted equal number of shares in KAFL, which was sold by the assessee by exiting at the most opportune moment by making good profits in roder to have a good return on his inves....