TaxTMI 
TaxTMI 
2018 (1) TMI 1429
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....ral assessees of Raipur have shown LTCG on sale of penny stocks like the assessee and on enquiry in the case Shri P.K. Agrawal &Co, broker, it was found that the transaction were of dubious nature. It was further held that scrips were not of reputed companies and there cannot be appreciation of 18-20 times in the prices of such scrips. The AO held that that the assessee has converted his unaccounted income into white income through LTCG and in this process has paid tax at 10% against the normal rate of tax. 4. In appeal before the CIT(A), the AR of the assessee contended that the action of AO is not justified. The AO has formed the opinion on the basis of general enquiries conducted in different cases of Raipur where the transactions relate to some other shares and were carried out through some other broker. named, Shri P.K. Agarwal & Co. The assessee has purchased and sold shares of Multiplus Resources Ltd., which is listed in the Calcutta Stock Exchange. The assessee filed all the necessary details of the transactions, such as contract notes for purchase and sales, copy of letter of transfer of the shares in the assessee's name, copy of share certificate, copy of ledger account,....
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.... that there was a systematic manipulation of the share prices in Kolkata Stock Exchange and unaccounted cash of numerous assessees was used through series of transactions to jack up the prices of shares of paper companies to arrange huge Long Term Capital Gain. These facts have come into light in the survey conducted in the case of M/s. P. K. Agrawal & Co. She has also referred to the inquiry conducted in the case or share brokers. Shri Prakash Chand Nahta & Co. and Shri Murarilal Goenka, Kolkata which was discussed in the assessment order. She had also stated that SEBI has suspended the certificate of registration of the broker on 15.12.2003 and on this basis, she has supported the A.O's action. 6. The assessee in his comment on the remand report contended that the A.O. has simply repeated the observations of the A.O. made in the assessment order in her remand report. She has not disputed the correctness of the evidences such as contract notes for purchase and sales; transfer of the shares in the assessee's name; share certificate; dematerialization of the shares; payment of Security Transaction Tax; the prevailing rates on the transaction dates, etc. All that the A.O. ha....
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....dition made by the AO. 9. Ld. DR has relied on the order of Assessing Officer. 10. On the other hand, ld. AR supported the order of CIT(A) and relied on the following decisions :- i) ITO Vs. Ravindra Sanghai (HUF), ITA No.698//Kol/2010, vide order dated 22.05.2012; ii) ITO Vs. Khalil M. Bharwani (2015) 45 CCH 0275 (MumbaiTrib) iii) ACIT Vs. Shri Ranjitsingh D. Bindra, ITA No.5534/Mum/2010, order dated 13.03.2013; and iv) CIT Vs. Kamal Kumar Agrawal, ITA No.67 of 2010, order dated 23.09.2010. 11. We have heard rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, the assessee has shown long term capital gain of Rs. 1,95,39,611/- and claimed exemption u/s.10(38) of the Act on the shares of M/s Multiplus Resources Ltd. purchased for Rs. 2,69,400/-, which was sold for Rs. 1,98,28,636/-. The AO observed that the assessee has shown long term capital gain on sale of penny stocks like several other assessees of Raipur and on enquiry in case of Shri P.K.Agrawal and company broker it was found that the transaction has been of dubious nature. The shares were not of reputed companies and there cannot be appreciation of ....
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....te of transactions; etc. The appellant has established that the shares Multiplus Resources Ltd. are still listed for trading. In the case of Shri Vishnu Kumar Agrawal, Bhilai (supra), the Hon'ble jurisdictional Tribunal has observed as under. "After hearing the rival submissions and carefully the material available on record and keeping in view of the, facts that without bringing out any material on record to prove the share transaction of the assessee bogus, the claim of the assessee in respect of LTCG cannot be termed as bogus, which the AO has done in this case. We also find that in this case the assessee has produced before the AO the copy of ledger with purchase details, copy of bill issued by broker, copy of share certificates, letter of Stanley Securities. regarding transfer of shares, copy of request slip for dematerialization of shares into assessee's Demant Account with IDBI Bank, copies of contract notes. copy of delivery slip and copy of bank account reflecting credit of sale proceeds. We also find that the ld. CIT(A) has passed a very speaking and justified order directing the AO to treat Rs. 27,22.370/- as LTCG on share transactions. For sake of convince, we....
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....saction shown by the assessee was a bogus transaction. The Commissioner (Appeals) took the view that if a company was not available at the given address, it could not conclusively prove that the company was non-existent. The Tribunal took into consideration that the Assessing Officer had not dealt with all the documents placed before him and had simply presumed that the transaction was bogus and held that the purchase contract note, contract note for sales, distinctive numbers of shares purchased and sold, copy of the share certificates and the quotation of shares on the date of purchase and sale were sufficient material to show that the transaction was not bogus but a genuine transaction. On appeal : Held, dismissing the appeal, that there was no material before the Assessing Officer, which could have led to a conclusion that the transaction was a device to camouflage activities to defraud the Revenue. No such presumption could be drawn by the Assessing Officer merely on surmises and conjectures. The Tribunal took into consideration that it was only on the basis of a presumption that the Assessing Officer concluded that the assessee had paid cash and purchased the cheque. In the....
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....ay face the consequences for his default under relevant statute. It is also noted that all the transactions are not off market transactions, hence, the AO's approach to pick and choose only such instances which are favourable to him cannot justify such addition. The Departmental Representative has also argued that there were differences in the information as per contract notes and as per information received from the stock exchange which fact is also not material because when some off market transactions have not been reported to the stock exchange, how such contract notes can be matched with the records of stock exchange. Economic consequences as a result of off market transactions or otherwise have taken place and, therefore, such transactions cannot be treated as sham merely for some discrepancies or for the view of the AO in regard to genuineness of these transactions. The Revenue has also relied on the decisions of SEBI involving some scrips. The role of SEBI is different and the orders passed by them have different objectives such as orderly conduct of share markets and investor protection and, therefore, such order cannot be conclusive as regards the genuineness of the trans....
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.... negated transactions. The AO also referred the issue that the trading of shares in the above stated company was barred/suspended by CSE and SEBI after SEBI detected malpractices in the said shares. According to AO, the assessee has made purchases through S. B. Bhutra & Co. in the scrip through Shri Narayan Rajkumar Mercantiles Ltd. But according to CSE vide letter dated 18.12.2007 the following transactions were reported: Name of the scrip Name of member/broker Date of transaction Multiplus Resources Ltd. KCA Stock Broking Private Ltd. 01.12.2004 Multiplus Resources Ltd. KCA Stock Broking Private Ltd. 29.11.2004 The broker vide letter dated 10.11.2007 confirmed the following facts: "1. The said client, Sri Rabindra Sanghai (HUF) purchased through us 10000 shares of Shree Narayan Raj Kumar Mercantiles Ltd. On 03.08.2004 @ 3.52 i.e. for Rs. 35,200/-. The payment of the said amount was made in cash on 05.08.2004. 2. Our ID No. is 0516. 3. Nature and quantity of the transaction is stated in Para 3. The trade was made through delivery and not speculative in nature. The delivery was made through DP. 4. Photocopy of Contract Note Enclosed herewith. The Demat account no....
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.... by cash as noted by AO in his assessment order qua the purchase of these shares but sale is supported by bank statement. We find that the payments are received through banking channels and assessee's claim of LTCG cannot be disturbed by the fact that some of the companies were indulged in malpractices at CSE and SEBI. When a query was raised to Ld. Sr. DR whether this particular scrip is put to scanner or not, Ld. DR could not reply and could not confirm that these transactions were under SEBI scanner. In such circumstances, we have no alternative except to uphold the order of CIT(A) and this appeal of revenue is dismissed." 16. The Mumbai Bench of the Tribunal in the case of ITO Vs. Khalil M. Bharwani, (2015) 45 CCH 0275 (Mumbai Trib), wherein it was held as under :- "5. In sum and substance the claim of assessee has been that it had purchased 10,000 shares of Emrald Commercial Ltd. through the broker Badri Prasad & Sons vide Bill No. CK012/20053226 dated 06.05.2004 which shares were purchased in physical form which were submitted to the Company for transferring in its name, which the company transferred by its letter dated 17.07.2004, which were later on submitted on 12.0....
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....the CIT(A). 7. After going through the rival submissions and material on record we find that Assessing Officer rejected the claim of long term capital gain on shares and brought the same to tax as unexplained cash credit under section 68 of the Act The stand of the assessee has been that the impugned receipt is on account of sale of shares which shares were duly purchased more than one year ago and were held thereafter continuously by assessee and therefore the gain on sale of such shares is to be held as long term capital gain exempt under section 10(38) of the Act. We find that assessee has purchased the shares through off market deal and therefore such transaction for purchase of shares by the assessee ought not to have been registered with the Calcutta Stock Exchange. Secondly, the Voucher for shares sold to the assessee issued by M/s Badri Prasad & Sons, broker of the Calcutta Stock Exchange has not been found as bogus or fabricated documents. 8. Assessee duly received physical delivery of 10,000 shares by way of 20 share certificates of 500 shares each of the company Emrald Commercial Ltd. and such shares were duly transferred in the name of the assessee by letter of the ....
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....fficer at relevant point of time. 10. The observation of the Assessing Officer that the transaction is not genuine and is engineered with a sole intention to show long term capital gain which is liable to a lower rate or income tax is because of (i) off market transaction, (ii) the payment for transaction is through cash (iii) physical delivery of shares has been given (iv) Kolkata Stock Exchange has denied having executed any transaction in the script i.e. Emerald Commercial Ltd. (v) shares were dematted in the month of August 2005 i.e. after more than one year of date of purchase (vi) shares were bought and sold in Kolkata has been duly rebutted and refuted by tendering sufficient evidence and therefore Assessing Officer Assessing Officer can only provoke a suspicion, much less a belief about the transaction. The suspicion of Assessing Officer cannot clinch the transaction against assessee. In view of the above CIT(A) was justified in holding that long term capital gain earned by assessee of `47,60,462/- should be treated as such and not taxed as income from undisclosed sources. Accordingly the decision of the CIT(A) need no interference from our side. We uphold the same." 17.....
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....formation from Bombay Stock Exchange that the shares of Blue Chip India Ltd., was not traded on the Stock Exchange on the dates given by the assessee. Thus, the learned DR has submitted that the facts and circumstances of the case clearly shows that the assessee has manipulated the accommodation entries of Long term capital gains against his own undisclosed income. He has relied upon the decision of the Chandigarh Bench of this Tribunal in the case of CIT v. Som Nath Maini 100 TTJ 917 (Chd.) 4. On the other hand, the learned AR of the assessee submitted that the transaction of purchase is duly supported by the documentary evidence. He has referred the bills issued by Prince Securities in respect of the purchase of shares of Blue Chip India Ltd., at pages 72 to 77 of the paper-book. The payment was partly made through cash vide receipt dated 10.04.2002 placed at page 76 of the paper- book. He has also referred to the ledger account of Prince Securities showing the transaction of purchase of shares. The learned AR has further submitted that Prince Securities has also given the confirmation memo in respect of the speculation profit arising from the transaction in the shares of Geome....
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.... the case of the assessee there is no such lack of availability of record or defect in the transaction of sale. He has supported the order of the CIT(A). 5. We have considered the rival submissions as well as the relevant material on record. The assessee claimed to have purchased 70,000 shares of Blue Chip India Ltd., in the month of April 2002 as under: Purchased on 10.04.02 37,000 shares for Rs. 20,350 Purchased on 12.04.02 37,000 shares for Rs. 18,150 The assessee purchased total 70,000 shares of Blue Chip India Ltd. for a total consideration of Rs. 38,500 at average cost of 55 paise per share. These shares were claimed to have been sold on various dates from September 2003 November 2003. The details of sale are given by the Assessing Officer in para 5.4.3 as under: Date of sale Quantity of shares Amount of sale proceeds Date on delivery was given by the assessee Date of payment to assessee Amount 10.09.03 7,000 376950 11.09.03 7000 17.09.03 76950 20.10.03 1,500 61725 20.10.03 1500 03.11.03 366475 21.10.03 2,500 101000 22.10.03 2500 10.11.03 284200 22.10.03 2,500 101000 23.10.03 2500 10.11.03 295875 23.10.03 2,500 102750 27.10.03 2500....
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....t from the submissions made and the evidence for purchase and sale of shares of M/s. BlueChip India Ltd., produced before me that a) The appellant has purchased 7000 shares of M/s. BlueChip India Ltd. from M/s. Prince Securities Ltd. and the bills/confirmations in respect of such purchases have been duly filed before me b) The source for the purchase is profit earned in the transaction of Hinduja Finance & Geometric Software and the balance amount has been paid by cash c) The shares were received by the appellant in physical form and the shares were duly transferred in the name of the appellant by letter of the company dtd. 17.8.2002 & 31.8.2002. Share transfer letter from Bluechip India Ltd with distinctive numbers, certificate numbers and folio nos were also submitted evidencing the transfer of shares in the name of the appellant. d) The shares which were transferred in the name of the appellant were later on demated on 15.7.03, 24.7.03 & 24.7.03. Copies of demat conversion slips in this respect were filed before me. e) In the Demat A/c filed with me, namely for the month of July, 2003 the above 70,000 shares were duly found in the list of demat shares along with other ....
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....ppellant in the statement recorded u/s. 131 were evasive (xi) the appellant has not shown the purchase of shares in the balance sheet as on 31.3.2003 has been duly refuted by tendering sufficient evidence and, therefore, in my view the disbelief of the AO can only provoke a suspicion, much less a belief about the transaction and in my view, the suspicion of the AO cannot clinch the transaction against the appellant. The various case laws relied upon by the AO viz. Of the ITAT, Chandigarh A Bench in the case of Somnath Mani reported 100 TTJ 917, the Supreme Court decision in Mcdowell & Co. Ltd. 154 ITR 148 & Supreme Court decision in the case of Azad Bachao Andolan reported in 263 ITR 706 has been duly emphasized by the AO while bringing to tax LTCG as unexplained income. Therefore, in my considered view, the long term capital gains earned by the appellant of Rs. 29,09,675 should be taxed as such and not as income from undisclosed sources. The grounds of appeal are allowed." It is clear from the finding of the CIT(A) that the shares of Blue Chip India Ltd. were duly shown in the balance sheet filed with the return of income for the A.Y. 2003-04 and, therefore, the assessee has d....
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....rded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Reliance placed by the counsel for the Revenue on the decision of the apex court in the case of Sumati Dayal [1995] 214 ITR 801 is wholly misplaced. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on findings of fact. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs." Thus, it is clear that when the assessee has produced all the releva....