TaxTMI 
TaxTMI 
2019 (3) TMI 156
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....company through the off market. It was brought to the notice of the AO that the purchase of shares of M/s. BREPL in off market was evidenced by bill of respective parties and that payments were made by account payee cheque. It was also brought to the notice of the AO that the said shares were shown as investment in Balance Sheet as on 31.03.2012 and 3.03.2013 respectively and no adverse view were taken by AO for the earlier years in respect to these investments and so it has been accepted by the department. On 16.03.2012, M/s. BREPL issued bonus shares in the ratio of 18:1 as on 31.03.2012 and thus, the assessee had 7200 (400 x 18) shares. The assessee produced the bonus share certificate issued by the company to substantiate this fact. Thereafter, on 12.02.2013, M/s. BREPL got amalgamated with M/s. UIL by an order of the Hon'ble High Court of Bombay dated 18.01.2013 and the ratio of exchange of shares between the transferor company and the transferee company was 10:1. It was brought to the notice of the AO that assessee was holding the shares for more than two years and M/s. UIL was listed at the time of sale in various stock exchanges like BSE, NSE, CSE etc In order to establish ....
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....on the documents filed before the authorities below to establish purchase and sale of scrips of M/s. UIL and contended that it had discharged its burden casted upon to prove the genuineness of the transactions and there is no material with the AO to draw adverse inference against the claim made by the assessee, wants us to overturn the order of the Ld. CIT(A) and allow the claim of LTCG. Per contra, the Ld. DR supported the action of the Ld. CIT(A) and does not want us to interfere in the order of the Ld. CIT(A). 5. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee had claimed LTCG on sale of shares of M/s. UIL of Rs. 21,82,119/- which was not accepted by the AO after taking note of the Investigation Wing's general report as well as looking at the fundamental financials of M/s. UIL was of the opinion that the shares of M/s. UIL cannot fetch such high astronomical value per share. So, according to AO, this claim of assessee is nothing but bogus and the whole transaction for claiming exempt income in the guise of LTCG cannot be allowed. On appeal, the Ld. CIT(A) confirmed the action of the AO. Before us, the Ld. ....
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....per book. Thereafter, the share certificate, dematerialization and de mat statement showing the shares allotment on merger is kept at pages 56 to 61 of the paper book wherein we note that the shares were kept by M/s. Ashika Stock Broking Ltd. in dematerialized form. We note that 44000 shares were sold by the assessee on 08.11.2013 through broker Ashika Stock Broking Ltd. vide contract note no. B/NM/155/35481 which is evident from page 62 of the paper book. Thereafter, 32000 shares were sold on 05.11.2013 through M/s. Ashika Stock Broking Ltd. vide contract note no. B/NM/152/34686 which is evident from page 63 of paper book. The de mat statement reflecting the sale corroborates the aforesaid fact which is evident from page 64 of the paper book. This fact is also corroborated by the broker's ledger reflecting the sale which is kept at pages 65 and 66 of the paper book. The sale consideration has passed through banking channel and is noted from the bank statement of the Corporation Bank copy of which is available at pages 67 to 69 of the paper book. We also note that the Balance Sheet along with computation which is evident from pages 72 - 73 of the paper book. Thus, the total sale va....
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.... has income from 'business and other sources'. He filed his return of income for the assessment year 2014-15 on 22.07.2014 declaring, a net taxable income of Rs. 2,10,190/-. The assessee claimed exempt income u/s 10(38) of the Act on sale of shares of M/s Unno Industries Ltd. amounting to Rs. 30,60,379/-. The AO for the reason cited at para 6 and 7 of his order treated the receipt of sale consideration on sale of shares as unaccounted income and made an addition u/s 68 of the act. On appeal, the ld. First Appellate Authority confirmed the same. Aggrieved the assessee is in appeal before us. 3. We have heard Shri Miraj D Shah, ld. counsel for the assessee and Smt. Ranu Biswas, the ld. Additional CIT DR on behalf of the revenue. 4. On a careful consideration and facts and circumstances of the case, perusal of papers on record, and orders of the lower authorities below as well as case law cited I hold as follows. 5. In response to the queries raised by the assessing officer on the issue of the fact that the assessee received Rs. 31,62,372/- from sale of once scrips i.e. 'Unno Industries Ltd.' the assessee submitted the following facts: "Details of P....
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....C. Bose Road, Kolkata-700020. DP Account opened on-31.08.2004 b) Name of DP- Guiness Securities Ltd. (DP ID No. IN302898) Demat account No. 10350406 Address of DP-Guiness House, 18, Deshpriya Park Road, Kolkata-700026. DP A/c opened on-25.05.2013 c) Name of DP- Tamilnad Mercantile Bank ltd. (DP ID No. IN303069) Demat account No. 10051996 Address of DP-Pearl Towers DPS Cell, AC 16, III Floor, II Avenue, Anna Nagar West, Chennai-600040. 9. Demat Statements of M/s Ashika Stock Broking Ltd. and Guiness Securities Ltd. for f.y. 2013- 14 and 2014-15 in respect of long term capital gains are enclosed. Annexure IV. 10. The Equity Shares of M/s Unno Industries Ltd. were submitted for dematerialization on 01.04.2013 and credited to my Demat A/c No. 1203450000003128 with M/s Ashika Stock Broking Ltd. (DP ID No. 12034500) on 12.04.2013 (91000 shares). Details of Sale of Share for Long Term Capital Gain financial year 2013-14(A.Y.2014-15): 1. The equity shares of M/s Unno Industries Ltd. are listed at Bombay Stock Exchange (BSE), a recognized Stock Exchange of India since last so....
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....an probabilities. Thus a deeper study was needed to ascertain whether the transactions were genuine investment transaction of sham ones and colorable device only to convert the unaccounted cash into tax exempt. 7. Apart from this, the directorate of income tax, Kolkata various enquiries have been made on project basis, which has resulted into the unearthing of huge syndicate of entry operators, share brokers and money lender involved in providing bogus accommodation entries of Long Term Capital gain and short term capital loss. It has come to the light that large scale manipulation has been done in market price of shown of certain companies listed in the BSE by certain beneficiary is utilized to purchase shares of such company at a very high artificially inflated market price. Some of the listed companies directly or in directly owned by operators and whose shares price have been apparently manipulated by the syndicate of operators. Out of the above enquiry made by DIT(Inv.), Kolkata has established that one of the main manipulated company which you had availed is also under this syndicate. Hence, it is crystal clear that Sharp Trading Company is one of the main manipulate....
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.... further relies on the shop increase of 31000% of the value of shares over the period of 2 years. Though this is highly suspicious, it cannot take the place of evidence. The Hon'ble Supreme Court has stated that suspicion however strong cannot be the basis for making an addition. The evidence produced by the assessee listed above proves his case and the AO could not controvert the same by bringing on record any evidence. The evidence said to have been collected by the DIT (INV.), Kolkata and the report is not produced before this Bench. 10. I now discuss the case law on the subject. The Hon'ble Calcutta High Court in the case of CIT, Kolkata-III vs. Smt. Shreyashi Ganguli reported in [2012] (9) TMI 1113 held as follows: "1. Whether on the facts and circumstances of the case, the order of the Ld.. Tribunal is perverse in law as well as on facts in deleting the addition made by the Assessing Officer as unexplained cash credit under section 68 of the Income Tax Act, 1961, by ignoring the facts on record. The ld. Tribunal after considering the material and hearing came to a fact finding which is as follows: The Assessing Officer has doubted the t....
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....ares 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, service tax, and cess. There is no iota 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 AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the 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 AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO's conclusions are merely based on the infor....
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....nce in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities 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 wherein the High Court held as follows : "It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to h....
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....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 contract notes under the Law and such contract notes are available in pages 41-52 of the Paper Book. We find that the Hon'ble Calcutta High Court in the case of Pr CIT Vs Rungta Properties Private Limited ITAT No 105 of 2016 dated 8th May 2017 in a similar issue dismissed the appeal of the Department by making the following observations: (11) On the last point, the Tribunal held that the Assessing Officer had not brought on records any material to show that the transactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this company was executed by a broker thro....
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....fied in rejecting the assessee's claim of exemption under section 10(38) of the Act. We also find that the ld CITA rightly relied on the decision of the 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 that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment. 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. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved i....