TaxTMI 
TaxTMI 
2018 (10) TMI 1431
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing total income of Rs. 3,16,250/-. She is a nonresident 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rimary documents evidencing the purchase and sale of equity 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 presumptio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hase and sale of shares are genuine and therefore, the Assessing Officer was not justified 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing documents :- a) Contract Notes issued by the registered share broker containing the number of shares 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... court) in the case of PCIT (Central), Ludhiana vs Prem Pal Gandhi in ITA No. 95 of 2017 dated 18.1.2018 had in similar circumstances held 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:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AR also submitted that even in the impugned assessment order the purchase of shares by the assessee was not held to be bogus. The ld 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 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 va....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncials of KAFL for the FY 2012-13 and drew our attention to the Notice convening the AGM. He submitted that it was the 28th AGM of KAFL which shows that the said company was incorporated for more than 28 years as on the end of the said financial 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 follow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. 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 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 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) (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterial especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee . 5.10. The ld AR submitted that there is no direct evidence against the assessee brought on record by ld AO to hold that the assessee introduced its own unaccounted money by way of bogus LTCG. The direct evidence as alleged 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 assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ta 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 ld AO did not accept the explanation 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 genui....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (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) 5.13. The ld AR further submitted before us that once the 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 inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red 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/2011 (Kol ITAT) (v) Ganeshmull Bijay Singh Baid HUF vs. DCIT - ITA Nos. 544/Kol/2013 (Kolkata ITAT) (vi) Rita Devi & Others vs. DCIT - IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vii) Malti Ghanshyambhai Patadia 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AR are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Hon'ble High Court. The ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon'ble High Court in May 2013 merely based on a statement given by a third party which has not been subject to cross -examination. Moroever, it is also pertinent to note that the assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transactions of shares of 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act. We also find that the various case laws of Hon'ble Jurisdictional High Court relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the assessee. 7.7. Moreover, we also find from pages 114 to 129 of the paper book that SEBI vide its order dated 21.9.2017 had revoked the restraint order banning 244 entities and persons from trading and dealing in securities by giving a categorical finding that they had no role in the manipulation of the scrip of Kailash Auto Finance Ltd. We find that the ld AO had grossly relied on the interim order passed by SEBI on 29.3.2016 to address the issue before us. In the said interim order of SEBI, restraint orders were issued. Now in the final order dated 21.9.2017, such restraint orders and other bans had been revoked by SEBI itself. Hence the primary reliance plac....