TaxTMI 
TaxTMI 
2019 (1) TMI 1350
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.... sale of shares on BSE and payment was received from the broker M/s. Globe Capital Market Limited. The Assessing Officer observed from the computation of income filed by the assessee that the assessee has calculated the long term capital gain on sale of shares and claimed the same as exempt from taxation u/s10(38), the details of which as under :- Name of company Sale Price Purchase price Transfer expenses Exempt u/s 10 (38) Rs.2,37,03,710/- 15,80,000/- 2,21,23,710/- 3. On further examination of the share sale transactions made by the assessee during the year under consideration, the Assessing Officer found that the entire sale proceeds were received from sale of one scrip i.e. M/s. Kyra Landscapes Limited (Earlier named as M/s. TCL Technologies Ltd. when the shares were purchased and then as M/s. Aricent Infrastructure Ltd. at the time of sale) only. The assessee was asked to give details regarding when and how the shares were purchased and evidence in this respect. The assessee submitted that he has sold 1,58,033 shares during the year under consideration which were allotted to him on 29.12.2010 by TCS Technologies. The amount of Rs.....
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.... do whatever business it likes, however, he was astonished in this case that a company running since 1991 has not earned any income from operations ever and still commanded such premium valuations. He examined the balancesheet of the company and noted that the reasons of the astronomical price rise were located somewhere else and certainly could not be related to the fundamentals or any hypothetical promising future of the company by any stretch of imagination. He noted that the company had allotted total of 1,30,05,000 shares at Rs. 10 each on 29/12/2010 to 48 entities ( mostly individuals and including the assessee Sh. Sanjeev Jain) through preferential placement. All these shares were locked in for trading till 28/12/2011. The shares of the company were very scarcely traded in the past but all of a sudden after the lock in period for preferentially allotted shares ended, the price and volume became disproportionate to its real financial position. 6. He observed that during most of the period between16/12/2010 till beginning of March, 2012, the trade volume remained very thin. In fact from 17/06/2010 till 08/07/2011 the trade volume was only 100 shares per instance that too in....
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....ion in the case of M/s. Essar India Limited, one of the buyers Sh. Saurabh Chandrakant Nagarseth accepted that he allowed his Demat account to be used for providing accommodation entries for bogus LTCG/STCG. His statement recorded during survey action was reproduced by the Assessing Officer in the body of the Assessment Order. He also issued commission to the investigation wing, Thane to examine some of the buyers of the scrip to ascertain whether these entities had the required sources to buy the scrip. The commissioned office reported that the buying parties were either bogus or had no explanation to offer in respect of the source of investment made by them. The Assessing Officer, therefore, concluded that the share price movements and sale purchase transactions were not genuine and were result of meticulously planned circular trading and the entities involved in these were part of this exercise in an effort to create documentary evidences for a pre-planned scheme for converting unaccounted money into tax exempt income. The Assessing Officer, thereafter, summoned the assessee u/s 131 of the IT Act and recorded his statement which has been reproduced in the body of the assessment ....
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....e company, it was a genuine transaction. Secondly, sale was made online after paying STT at the prevalent market rates, therefore sale transactions were also genuine. The contention of the assessee was examined. It is not the case of this office whether purchase of shares through preferential placement did actually took place or shares were sold on the exchange at the prevalent market rates after paying STT or not. What this office has come to conclude on the basis of above analysis, documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities is that what is apparent in this case is not real, that these financial transactions were sham ones and that this entire edifice was only a colourable device used to evade tax." 13. Relying on various decisions including the decisions of Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT reported 214 ITR 801 and the decision in the case Durga Prasad More Vs. CIT the Assessing Officer held that the assessee has introduced/ credited his capital of Rs. 2,36,97,101/- which attracts the provision of section 68 of the IT Act. The relevant observation of the Assessing Officer at para 3.8.10 and 4 of the....
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....dscape Ltd. The appellant has sold such 158033 shares during the year under consideration for Rs. 23697101/-. It has been noted by the AO when the appellant purchased these shares @ Rs. 10 - each, the market price of the script v;f.s 50 Paisa each. The price of the script jumped Rs. 125/- each share after March, 2012. it has been noted by the AO that M/s TCL which is running since 1994 has not earned any income from operations and still commanded such huge price in the market. The AO has referred to the financial results of TCL for various financial years before making such observations. The price of the script has increased from Rs. 0.5 per share to Rs. 154.65 in just 18 months from 16-12-2010 to 17- 07-2012. As soon as lock-in period of one year from the date of preferential allotment finished by first week of March, 2012, there was abnormal increase in volume and price of the script, thus, making way for the preferential share holders to make exit by taking away huge exempt long term capital gain. Such abrupt increase was not in any proportion with the changes in SENSEX index. These facts led the AO to conclude that price of the script has been rigged. The AO has ;aade further a....
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....on of the appellant has been reproduced as above. The facts of the case along with submission of the appellant on the above grounds of appeal have been gone through. It is noted that the appellant has purchased preferential shares of TCL Technology on 21-12-2010 @ Rs. 10/- each and the same have been sold during assessment year 2012-13 @ varying from Rs. 98/- to Rs. 160/- per share for a total consideration of Rs. 2.37 crore. It has been observed by the AO in the assessment order that price of shares of TCL Technology have increased manifold time with effect from March, 2012 as soon as the mandatory lock-in period of one year from the date of purchase of preferential shares had expired. Such abnormal increase in the price of shares of TCL Technology has been more than 8500%. This was the period which has availed by the appellant to book exempt long term capital gain. On the perusal of the financial results of TCL Technology it is noted that it has shown total income of Rs. 24 lac and Rs. 86 lac as on March, 2011 and March, 2012 respectively in the shape of other income with Nil turnover. Even as on March, 2013 it has shown total turnover of Rs. 5.56 crore with operating pr....
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.... following grounds of appeal :- 1. BECAUSE the "CIT(A)" has erred in law on facts in holding that selection of case through CASS being based on instructions issued by CBDT under section 119 of the Income Tax Act, 1961, hereinafter referred t: as "Act", was valid and on that basis upholding the validity of notice issued under : action 143(2) and the assessment order dated 30.03.2016 passed by the ITO, Ward -3t4 Saharanpur. 2. BECAUSE selection of case for scrutiny assessment, not being based on the opinion expressed by the Assessing Officer in due discharge of his judicial authority to do so, it deserved to be held that no notice under section 143(2) had been issued and the assessment order dated 30.03.2016 stated to have been passed under section 143(3) is wholly illegal. 3. BECAUSE owing to vital deficiency in the proceedings caused by non12 '"'Issuance of a valid notice under section 143(2) the CIT(A)" should have held that the addition of Rs. 2,36,97,101/- which was the only variation between the retuned income and 'assessed income' was wholly illegal and unauthorized too. WITHOUT PREJUDICE TO THE AFORESAID 4. BECAUSE ....
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....ing the same to taxation. 8. BECAUSE the transactions, apart from being verifiable from Stock Exchange, stood verified from the statements of the brokers (with whom the appellant had dealt) and the contract notes issued by them and such contract notes not being found to be false, fabricated or non-existent even after independent enquiries made by the Assessing Officer, the consideration realised by the appellant could not have been treated differently than what had been shown by it. 9. BECAUSE in any case, addition made and sustained by the authorities below is wholly vitiated as the same is solely based on extraneous consideration/presumption of bad faith, which is not permissible in law. 10. BECAUSE the case laws referred to and relied upon by "CIT(A)", while upholding the addition of Rs. 2,36,97,101/- are wholly distinguishable on facts and the inference drawn on the basis of such case laws, cannot be sustained either on facts or in law. 11. BECASE the order appealed against is contrary to the facts, law and principles of natural justice. 16. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). He submitted that the....
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....ce, Id. AR submitted firstly it is a matter of record that shares have been sold at the rates, as were prevailing on the stock exchange at the time of sale; secondly price of shares in the share market are sentiment driven; thirdly share prices of all the scrips are closely monitored by the Stock Exchange and SEBI; and lastly even if prices have gone up artificially (as alleged) there is no material to hold that assessee was involved therein. 15.1 In relation to statement of Shri Saurabh Chandrakant Nagarsheth dt. 09.06.2015, he submitted that said statement does not refer to his dealing in the shares of M/s Aricent Infra Ltd. or to the assessee's transaction, therefore, said statement is not relevant for deriving any positive or negative inference at all. In any case, in spite of specific request cross-examination was not allowed to the assessee. Referring to various decisions he submitted that non granting of cross examination request by the assessee violates principles of natural justice and addition based on such material renders the addition void and illegal. 15.2 Referring to pg. 121-199 of the paper book being the enquiries as were made by the Assessing Officer from va....
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.... 17. Ms. Amita Bansal Vs. CIT reported in [2017] 98 CCH 0128 AIIHC (Mumbai) 18. ACIT - 14 (3) Vs. Shri Ravinder Kumar Toshniwal, ITA No.5302/Mum/2008 (Mumbai) 19. ITAT Hyderabad Bench ITO Vs. Smt. Aarti Mittal [2014] (Hyderabad) 20. ITAT Lucknow Bench in the case of ITO Vs. Shri Vijay Kanodia 21. Smt. Manju bkansal Vs. ITO - 1 (1) ITA No.70/LKW/2011 (Lucknow) 22. Tekchand Rambhiya HUF Vs. ITO ITA No. 960/Mum/2012 23. DCIT Vs. Sunita Khemka ITA No.714 to 718/kol/2011 24. ACIT Vs. Pradeep Kumar Aggarwal reported [2016] 159 ITD 54 (Chandigarh-Trib.) 25. Hon'ble ITAT Mumbai in the case of Farrah Marker Vs. ITO [Mumbai ITAT] 26. ITO Vs. Indravadan Jain HUF [2016] 47 CCH 0303 MumTrib 27. ACIT Vs. Shri Ziauddin A Siddque, ITA No.5182 & 5183/Mum/2011 28. Shri Pratik Suryakant Shah & Ors. Vs. ITO ITA No.810 to 815 & 922 to 926 /Ahd/2015 29. Dolarrai Hemani Kolkata Vs. ITO 30. ACIT Vs. Vineet Sureshchandra Agarwal [2017] 49 CCH 0003 Ahd Trib 31. Shri Sunil Prakash Vs. ACIT ITA No.6494/Mum/2014 32. Smt. Sunita Jain 7 Ors. Vs. ITO ITA No.501 & 502 /Ahd/2016 ....
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.... sale of shares is false and concocted, as no actual purchase of shares took place, which is not the case here. 18.2. So far as the decision in the case of Balbir Chand Maini (supra) is concerned he submitted that in this case not only purchase of shares remained unproved, sale of shares was also held to have remained unproved as "shares claimed to have been sold through broker had not been transferred even at the time of making enquiry by the Assessing Officer and the same continued to be registered in the name of the assessee. 18.3. So far as decision in the case of Usha Chandresh Shah (supra) is concerned, he submitted that in this case, payment for purchase of shares was not made by cheque but claimed to have been adjusted against speculation profit and balance amount in cash. Further, purchase of shares could not be cross verified by the Assessing Officer and shares were D-mated just prior to sale thereof. Thus onus to produce necessary evidences to connivance that the shares were purchased and sold at prices claimed was not discharged by the assessee. It was under such circumstances, appeal of the assessee was dismissed by the Tribunal. 18.4. So far as the decision i....
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....shares so allotted were credited in the De-mat account of the assessee in due course and out of shares so held in the De-mat account, the assessee sold 1,58,033 shares from May, 2012 to October, 2012 for a price ranging from Rs. 98/- to Rs. 160/-through online trading through registered stock broker namely M/s. Globe Market Limited. It is also his submission that the payment of the sale price after deduction towards STT, brokerage and other incidental charges were credited to his bank account and no discrepancies whatsoever were found by the Assessing Officer in respect of various documents produced before him. Therefore, according to him merely on the basis of suspicion and surmise, no addition can be made u/s 68 of the IT Act. 20. We find some force in the arguments advanced by the Ld. Counsel for the assessee. It is an admitted fact that 2,00,000 equity shares of Rs. 10/- each of M/s. TCL Technology Limited were purchased by the assessee for Rs. 20 lac which were paid through RTGS on 21.12.2010 from his savings bank account maintained with Shivalik Mercantile Co-operative Bank Limited. The shares were duly credited to the D-mat account of the assessee and on being enquired by....
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....trial Gases Ltd., Mobile Telecommunication Ltd., M/s Rashel Agrotech Ltd. and M/s. Sentil Agrotech Ltd, which were purchased during the year 1999-2000 and 2000-2001. The entire sale consideration amounting to Rs. 1,41,08,484/- was utilized for the purchase of a flat at Colaba, Mumbai and accordingly benefit of section 54E of the Income Tax Act, 1961 was claimed. 4 The Assessing Officer has held that neither the purchase nor sale of shares were genuine and that the amount of Rs. 1,41,08,484/- stated to have been received by Assessee on sale of shares was undisclosed income and accordingly made addition under section 69 of the Income Tax Act, 1961. The Appeal filed by the Assessee was dismissed by CIT (A). 5 On further Appeal, the ITAT by the impugned order allowed the claim of the assessee by recording that the purchase of shares during the year 1999-2000 and 2000-2001 were duly recorded in the books maintained by the Assessee. The ITAT has recorded a finding that the source of funds for acquisition of the shares was the agricultural income which was duly offered and assessed to tax in those Assessment Years. The Assessee has produced certificates from the aforesai....
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....ce, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction. Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case. 11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the....
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....m 425 (Gujarat) has observed as under :- 4. As can be seen from the impugned order, the Tribunal, after appreciating the evidence on / record, has found that before the Assessing Officer the assessee had explained that the purchase transactions were made on the "Online Trading System" and these transactions were genuine. Earlier, that is prior to 1-4-2005, it was not compulsory for the client to have his own transaction record under SEBI guidelines. Therefore, the purchases earlier were made using the broker's code, and it was for this reason that the broker had used the "self code". Since the shares were sold after 1-4-2005, the transactions were not under the broker's code. As regards service-tax and stamp charges the contract note of the broker clearly mentioned that the brokerage was inclusive of service tax etc. In the case of the selling broker the Service tax Securities Transaction tax and Education Cess were separately mentioned. As regards the point raised by the Assessing Officer that there was absence of broker-client agreement, the Tribunal accepted the submission of the assessee that the genuineness of the transactions was already proved by the contract no....
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.... 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 Assessing Officer 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/- in the said shares purchased during the financial year 2005-06 and the Assessing Officer was directed to reopen the case of the assessee for the assessment year 2006-07 on this issue ? (iii) Whether the Hon'ble ITAT has erred in ignoring an important aspect that in such cases of sham transaction of shares showing abnormal hike in their value, where the facts themselves speak loud and clear, the Assessing Officer is justified to even draw an inference from the attendant circumstances ? (iv) 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. 12,59,000 made by the AO on the basis of seized document on the grounds that the Assessing Officer has not pointed out as to how the fi....
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....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 e. .deuces before the AO which are copy of the shares certificates with transfer form, copy of debit note issued by Shreeji Broking (P) Ltd., copy of cash receipt of Shreeji Broking (P) Ltd., copy of the account statement of the assessee in the books of the broker, copy of ledger account of Indus Portfolio (P) Ltd., copy of evidence for payment of securities transaction tax and copy of the bank statement of the assessee to show that the assessee had entered into genuine transaction of purchase of share which were later on sold through the broker on recognized stock exchange after payment of STT. The claim of the assessee for sale of shares has been supported by the documentary evidences which have not been rebutted by the authorities below. Whatever inquiry was conducted in the cases of other parties and statement recorded of several persons namely Sh. Anil Khemka, Sh. Sanjay Vohra and Sh. Bidyoot Sarkar as referred in the assessment order and the report of the Investigation Wing were no....
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....erving as under :- "8. A perusal of the order of the AO demonstrate: 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 company' as one of the main ,manipulated company and whereas the assessee sola scrips in Unno Industries Ltd. The AO refers to various enquiries made by "The Directors of Income Tax" , Kolkata on project basis and that this resulted into unearthing of a huge syndicate of entry operators and share brokers and money lenders involved in providing of bogus accommodation entries. The report as the so-called project and the evidence collected by the DIT (Inv.), Kolkata etc have not been brought on record. It is well settled that any document relied upon by the AO for making an addition has to be supplied to the assessee and an opportunity should be provided to the assessee to rebut the same. In this case, general statements have been made by the AO and the addition is made based on such generalizations. The assessee has not been confronted with any of the evidence collected in the investigation done by the DIT(Inv.), Kolkata. Evidence collected f....
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.... 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] (Cat HC) - In this case the Id AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon'ble High Court held that the opinion of the AO that the assessee 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 Id 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 pla....
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....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 purchase and sale of shares resulting in long term capital gain. These evidences were neither found by the AO nor by the Id. CIT(A) to be false or fictitious or bogus. 7ne facts of the case and the evidence in support of the evidence clearly support the A.aim of the assessee that the transactions of the assessee were genuine and the ante: rities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act. For coming to such a conclusion we rely on the decision of the Hon'ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wehrein the High Court held as follows :- " It appears that there was loss and the whole transactions were ....
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....rove that the assessee or any one on his behalf was manipulating the stock prices. The stock exchange and SEBI are the authorities appointed by the Government of India to ensure that there is no stock rigging or manipulation. The Id AO has not brought any evidence on record to show that these agencies have alleged any stock any stock manipulation against the assessee and or the brokers and or the Company. In absence of any evidence it cannot be said that merely because the stock price moved sharply, the assessee was to be blamed for bogus transactions. It is also to be seen that in this car-. the shares were held by the Donors from 2003 and sold in 2010 thus there was a holding period of 7 years as per Section 49 of the Act and it cannot be said that the assessee and the Donors were making such plans for the last 7 years to rig the stock price to generate bogus capital gains that too without any evidences whatsoever. 9.2 It is also pertinent to note that the assessee and / or the stock broker M/s P Didwania & Co and Toshith Securities P Ltd., both registered share and stock brokers with Calcutta Stock Exchange had confirmed the transaction and have issued legally valid con....
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.... Officer. We find that the allegation that the assessee and / or brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuiness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the Ld. Assessing Officer to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the Ld. Assessing Officer was not justified in rejecting the assessee's claim of exemption under section 10 (38) of the Act. We also find that the Ld. CIT (A) rightly relied on the decision of Hon'ble High Court at Calcutta in the case of ALPINE INVESTMENTS in ITA No. 620 of 2008 dated 26th August 2008 wherein the Hon'ble Court held as follows : It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee.....