TaxTMI 
TaxTMI 
2019 (6) TMI 297
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....ds. (our attention was drawn to page 15 of paper book wherein we note that M/s. ACFL did not merge with M/s. GIFL but the name of M/s. ACFL was changed to M/s. GIFL, which we note from the Certificate of Incorporation dated 28.02.2012 issued by Govt. of India, Ministry of Corporate Affairs). Thereafter, the AO observed that assessee was not involved in activities of transactions in other shares and the assessee has not earned any LTCG from the sale of other shares. Thereafter, the AO discussed in the assessment order the general report of the Investigation Wing of the Income-tax Department which he reproduced from page 3 of the assessment order. According to general observations, the AO notes that the assessee has misutilised the system and wants to bring her unaccounted money into her regular books so that assessee can get immunity from paying any taxes. The AO notes at page 20 of the assessment order that some brokers have given statements u/s. 131 of the Act wherein they have said that in lieu of commission given to them, they facilitated the pre-arranged accommodation entries to enable the assessee to make exempt LTCG gain/loss. Thereafter, the AO cited the SEBI's observation....
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....fore, according to him, in the light of the documents produced by the assessee against which the AO has not made any adverse comments; and AO failed to adduce any material specifically against the assessee/broker/scrips or any adverse material has emanated from the investigation report of department/SEBI/SIT, the denial of the claim of exempt of LTCG is unjust, arbitrary and, therefore, pleads that the exempt LTCG claim to the tune of Rs. 68,96,192/- be allowed. 5. Per Contra the Ld. DR vehemently supporting the order of the lower authorities drew our attention to the fact that the assessee had purchased the shares for Rs. 4,00,000/- and within a short span of time sold the same at Rs. 70,00,000/- which is unimaginable and goes against the preponderance of human probability. According to him, the department painstakingly has unearthed the systematic and nefarious practice of some brokers who had acted hand in glove with some paper companies have indulged in issuing shares for beneficiaries like assessee at a very low price and later after expiry of a holding period of twelve months, sells it at sky rocketing rates which is unimaginable and goes against the preponderance of human p....
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....ook wherein quantity of 40,000 shares of M/s. ACFL had been purchased by assessee for an amount of Rs. 4,00,000/- dated 13.09.2011 is found). We note that the payment was made by account payee bank transaction on 13.09.2011 which is evident from page 14 of the paper book which is the bank statement of the assessee maintained at Vijaya Bank. We note that M/s. ACFL changed its name to M/s. GIFL on 28.02.2012 which is evident from Certificate of Incorporation issued by Ministry of Corporate Affairs, which is available at page 15 of the paper book. The shares have been purchased from M/s. KKJ Stocks & Co. which is evident from perusal of the copy of the purchase bill. The copy of the share transfer deed and the transfer advice, share transfer forms along with share certificate is found placed at pages 10-11 of paper book and the transfer letter from the company duly transferring the shares in the name of the assessee has been filed. Further, we note that the shares have been sub-divided into 4,00,000 equity shares certificates of which has also been filed and is available at page 12 in the paper book. The assessee has purchased the shares from the off market and was in the physical for....
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....not justify his claim as genuine by producing evidence and was only arguing for the matter to be set aside to the lower authorities on the ground of natural justice. As similar arguments were not raised before the lower authorities by the assessee, the ITAT rejected these arguments. In the case on hand, all evidences were produced by the assessee. In the case of Sanjay Bimolchand Jain, legal heir of Santi Devi Bimalchand Jain, the Hon'ble High Court upheld the stand of the Revenue that the transaction in question is an adventure in nature of trade and the profit of the transactions is assessable under the head of 'Business Income'. In the case on hand, the Ld. Assessing Officer has not assessed this amount as 'Business Income'. In any event, I am bound to follow the judgment of the Jurisdictional High Court in this matter. I find that the assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made, by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement re....
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....ctions have been carried out through banking channels duly recorded in the Demat accounts with a Government depository and traded on the stock exchange unless specific evidence emerges that the assessee was in hand in gloves with the broker for committing the unscrupulous activity to launder his own money in the guise of LTCG is brought on record by the AO. 22. There is also nothing on record which could suggest that the assessee gave his own cash and got cheque from the alleged brokers/buyers. The assessment is based upon some third parties statements recorded behind the back of the assessee and the assessee has not been allowed to cross examine those persons, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee in the light of the documents to substantiate the claim of LTCG, which has not been found fault with by the AO. 23. Let us look at certain judicial decisions on similar facts:- 24. The case of the assessee's is similar to the decision of Hon'ble Bombay High Court, Nagpur Bench in CIT vs. Smt. Jamnadevi Agrawal & Ors. dated 23rd September, 2010 reported in (2010) 328 ITR 656 wherein it wa....
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....med; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished." 12. The Hon'ble High Court of Rajasthan in CIT vs. Smt. Pushpa Malpani - reported in (2011) 242 CTR (Raj.) 559; (2011) 49 DTR 312 dismissed the appeal of department observing 'Whether or not there was sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations, of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. Therefore, 'the prese/itdppeal does not raise any question of law, much less any substantial question of law." 25. The Hon'ble High Court of Punjab and Haryana in the case of Anupam Kapoor 299 ITR 0179 has held as under:- "T....
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....ement of a broker. The relevant part reads as under:- "14. The entire assessment is based upon the statement of Shri Mukesh Choksi. It is an undisputed fact that neither a copy of the statement was supplied to the assessee nor any opportunity of cross-examination was given by the Assessing Officer/CIT(A). The Hon'ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:- "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order i....
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....s is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 16. On the strength of the aforementioned decision of the Hon'ble Supreme Court, the assessment order has to be quashed. 17. Even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bomb....
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....he Tribunal by observing as follows:- "4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The ld. AR has also submitted the IT return, ledger copy, letter to AO land PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase & sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities. 4.1 From the aforesaid discu....
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....ibunal, 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 information received by him. The appeal filed by the revenue was dismissed. vi) 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 AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. vii) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] - In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the tran....
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....(Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 29. The ld AR also brought to our notice 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 inference of that fact. The Hon'ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgmen....