TaxTMI 
TaxTMI 
2018 (11) TMI 261
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the opinion that the entire transaction was bogus and, therefore, he was pleased to add the entire sale consideration of M/s. NFGL of Rs. 2.16 cr. as income of the assessee. The AO also held that in order to raise such capital gain, the assessee must have incurred some cost towards commission, therefore, the AO estimated such commission @ 5% of sale value and added a sum of Rs. 10,82,460/- to the income of the assessee. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of the AO. Aggrieved, the assessee is before us. 3. Before us the Ld. AR submitted that the addition made by the AO and upheld by the Ld. CIT(A) was based on presumption and suspicion alone and, therefore, perverse in the eyes of law. In the course of hearing of the case, the Ld. AR referred to various documentary evidences furnished in the paper book in support of the claim of the assessee to prove the genuineness of the transactions relating to LTCG on sale of shares. The Ld. AR drew our attention to the order of the AO wherein the AO has erroneously recorded at para 3.1 that the assessee had purchased the shares of M/s. NFGL off market (not through esta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... i) Copy of balance sheet of the assessee as on 31.03.2013 (FY 2012-13 corresponding to AY 2013-14) along with details of investments (page nos. 4 and 5 of paper book) wherein 25000 shares of M/s. NFGL of value of Rs. 32,21,269.18 is reflected and we note that the assessee had made investment in 30 no. of different shares including that of L&T, Reliance, TISCO, Infosys, ICICI, Infotech etc. and had investments altogether of Rs. 87,44,010.73 which has been duly reflected in page 4 of the paper book which is the Balance Sheet as on 31.03.2013 wherein the share investment of Rs. 87,44,010.73 has duly been reflected and is tallying. ii) Contract Note for purchase of shares of M/s. NFGL is found placed at page 6 of the paper book. iii) Copy of the bank statement highlighted the payment of purchase of shares through bank (paper book page 18 & 19). iv) Copy of de mat holding statement and transaction statement highlighting the movement of shares from page 25 to 33 of the paper book. v) Copy of ledger of assessee in the books of the share broker pages 34 to 36 of the paper book. Following documents were filed before the authorities below in support of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs were adversely named/commented upon in the report of investigation. According to ld AR, the AO identified 10-11 adverse features on page 6-7 of the Assessment order, however he wondered as to how these features were relating to the Company (M/s. NFGL) in the case of assessee was not at all demonstrated. Thus according to ld AR, there was no material whatsoever to hold that the Company (M/s. NFGL) dealt by the assessee was having such pattern or features. It was submitted that the AO disallowed the assessee's claim of LTCG on sale of shares on surmises, 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. The ld AR drew our attention to the fact that the purchase and 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owever, this presumption or suspicion howsoever strong it may be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. The ld AR referred to the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT [2017] 164 ITD 1 (Mumbai-Trib.)(SB) The Tribunal observed as under: 46. ......... Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of 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 admitte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (ii) CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) - In this case the Hon'ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not 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, servi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (i) Baijnath Agarwal vs. ACIT - [2010] 40 SOT 475 (Agra (TM) (ii) ITO vs. Bibi Rani Bansal - [2011] 44 SOT 500 (Agra) (TM) (iii) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agra/2009 (Agra ITAT) (iv) ACIT vs. Amita Agarwal & 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] 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owing judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT - ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT - [2006] 6 SOT 247 (Mum) 12. 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 unknown 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 adver....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ench of Mumbai Tribunal, various case laws relied on by the AO against the assessee are irrelevant in as much as the said orders are based on conclusions drawn on the basis of circumstantial evidences only without any material evidence on record and cannot be applied in the case in hand because assessee has discharged the burden of proof by producing relevant legally admissible evidence, which the AO could not find fault with. On the other hand, the Ld. DR vehemently supported the impugned order of Ld. CIT(A)/AO and does not want us to interfere in the impugned order. 15. We have heard both the parties and perused the records. It was brought to our notice by the Ld. AR in the assessment order at para 3.13 the AO has stated in sub-para 'c' that "the assessee purchased shares at Rs. 865.97 per share ......". It was pointed out by the Ld. AR that the assessee has purchased share of M/s. NFLG for Rs. 128.25 per share which is reflected in page 6 of the paper book which is the contract note. According to Ld. AR this is nothing but cut paste of some other case and has nothing to do with the assessee's case and it exposes non-application of mind of the AO. We find that the AO has state....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccount and find it to be correct. We on perusal of page 24, which is the transaction cum holding statement of Stock Holding Corporation of India Ltd. find that the share of M/s. NFGL was held in De-mat account. We note from a perusal of page 26, which is the transaction statement of Demat account shows that M/s. NFGL's shares of Rs. 25,000/- by inter depositing transfer on 15.06.2012. A perusal of page 30 of paper book, which is the transactional statement of Demat account corroborate the sale of scrips of M/s. NFGL (from 07.08.2013 - 30.10.2013). A perusal of pages 34-36 of paper book, which is the ledger of assessee in the books of share broker (01.04.2014 to 31.03.2014) corroborates the sale transaction of scrips of M/s. NFGL. 17. The assessee had sold the shares on 05.08.2013 5000 shares at the value of Rs. 820/- per share and paid STT and received a consideration of Rs. 40,82,079/- which the assessee received by account payee cheque which is reflected in page 21 of the paper book received on 24.08.2013. Like wise, the other sale transactions are reflected from pages 8 to 17 of the paper book for different rates from Rs. 845/- per share, Rs. 865/- per share, Rs. 920/- per sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uments, failed to return a finding that documents produced by assessee to substantiate the yield of LTCG was false or fabricated. The facts of the case as discussed, and the evidence adduced by the assessee, support that the transaction made by the assessee through registered stock broker through Bombay Stock Exchange, after remitting STT and all payments were transacted through bank and the shares were held in De mat account, has to be accepted in the absence of any other material to suggest an adverse view. The AO/Ld. CIT(A) erred in rejecting legally admissible evidence and wrongly took adverse view against the claim of assessee based on surmises, suspicion and conjecture. This action of AO/Ld. CIT(A) is akin to convert "Proof into no proof." We note that AO while describing the modus operandi adopted by unscrupulous elements in the financial markets has made a vague statement that some accommodation entry provider has admitted that M/s. NFGL also indulged in wrong practices, however, we sought the Ld. DR's help to throw some light on this specific allegation made by the AO. However, other than the bald statement, nothing adverse could be found against the shares of M/s. NFGL. E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onderance 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. 18. 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 materi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the impugned order. The suggested question, in our opinion do not raise any substantial question of law. 19. In the light of the documents furnished i.e. (i to v & i to iii) in Para 3(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered into any illegal actions/ modus-operand prohibited by law as alleged 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 ....