TaxTMI 
TaxTMI 
2019 (6) TMI 475
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....ce u/s. 143(2) of the Act dated 29.07.2006 and subsequently notice u/s. 142(1) of the Act along with questionnaire dated 11.01.2017 were issued and served upon the assessee fixing the date of hearing on 18.01.017. In response the said notices, assessee himself appeared from time to time and necessary documents and explanations were filed. On perusal of the said submissions of the assessee, the AO found that the assessee had purchased scrip of M/s. CCL International Ltd. of 5000 shares. These shares were sold during the FY 2014-15 relevant to AY 2015-16 and assessee claimed exemption on account of LTCG u/s. 10(38) of the Act in his return for AY 2015-16 having capital gain of Rs. 21.96,793/-. It was brought to the notice of AO that the assessee had purchased 5,000 shares of CCL International Ltd. in June, 2013 from M/s. Goodshine Commerce Pvt. Ltd. for a consideration of Rs. 2,60,000/-. The consideration amount of Rs. 2,60,000/- was paid by assessee to the seller of the said shares by account payee cheque No. 547147 drawn on Indusind Bank Account no. 200004739924. The aforesaid 5,000 shares of CCL International Ltd. were received in Dernaterialized form to the assessee's DEMAT a....
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....ere identified to be indulged in giving beneficiaries LTCG etc. so number of search & surveys were conducted in the office premises of more than 32 share broking entities which inturn accepted that they were actively involved in the bogus LTCG/STCL scam. Surveys were also conducted in the office premises of many accommodation entry providers and their statements recorded. All have accepted their role in the scam. Beneficiaries of more than Rs. 38000 crores have been identified and segregated DGIT(Investigation) wise. Total number of more than 60,000 PANs of the beneficiaries have been identified which have been reported to the assessment wing through the DGITs. Out of 84 penny stock companies which have been used for generating bogus LTCG , the above named penny stock, i.e. M/s. CCL International Limited is included. According to AO, the basic trade pattern of all the 84 scrips are same. A close view of all such data suggested that there is a common pattern in the trading of such scrips and the pattern is that they represent a bell shape in their trading. It means first, their prices start from low range, then it rises rapidly, stays there for a while and then it decreases more rap....
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....5 in the case of M/s. CCL International Ltd. passed u/s. 143(3) of the Act held that the scrips of M/s. CCL International Ltd. cannot be called as bogus and allowed the claim. So the Ld AR wants us to allow the claim of the appellant/assessee. 6. The Ld. DR for the Revenue vehemently opposed the contentions of the assessee and took us through the AO's order and Ld. CIT(A) order and submitted that scrips of M/s. CCL International Ltd. was artificially rigged to provide LTCG to the assessee which cannot be allowed and supported the impugned order and relied on the order of Hon'ble Bombay High Court in the case of Binod Chand Jain in Tax Appeal No.18 of 2017 and so he does not want us to interfere with the impugned order . 7. I am not repeating the facts again for the sake of brevity. In a nutshell, I note that the assessee had purchased scrip of M/s. CCL International Ltd. of 5000 shares. These shares were sold during the FY 2014-15 relevant to AY 2015-16 and assessee claimed exemption on account of LTCG u/s. 10(38) of the Act in his return for AY 2015-16 having capital gain of Rs. 21,96,793/-. In the assessment order the AO did not accept the transaction of the assessee and he....
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....ed that in the instant case, the assessee is not connected with M/s. CCL International Ltd. or their promoters, directors and any other person who exercises any control over M/s. CCL International Ltd. or any so called entry operator. There is no evidence/material to suggest that the assessee has indulged in any dubious activity nor has been part of any modus operandi as stated by the AO. It is noted that there is no material/ evidence in the hands of the AO to conclude what is apparent is not real. In the absence of any link between the assessee and the alleged admissions of the directors and brokers, no adverse inference can be drawn against the assessee.In the assessment order AO had relied upon the purported statements of various alleged operators on the basis of which the AO had drawn adverse inference in the instant case. However nowhere any of them has named the assessee in the alleged manipulation. Further, the AO neither provided a copy of the third party statement which show the complicity of assessee in any wrong doing to claim LTCG nor gave any opportunity to cross examine the said persons. It is a well-settled principle of law that no credence can be given to the state....
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....Year. It has not been brought on record that the sale of similar shares in the earlier Assessment Year has been doubted or not. It is not in dispute that, in so far as purchase of shares through cheque is concerned the same were duly reflected in the bank account of the assessee and shown in the earlier years and the sale consideration is also supported by following evidences:- a) Contract note giving date, time settlement details etc b) STT is paid on transaction c) Transaction is through Trustline Securities d) Sale is made on online market of Bombay Stock Exchange e) Consideration is received electronically in bank through RTGS f) Shares are transferred from Demat Account. 9. Apart from that, it is not in dispute rather both Assessing Officer and ld. CIT (A) in their exhaustive order have incorporated the price movement of the said scrip right from 06.02.2010 to 09.12.2016 and on perusal of the same it is seen that there has been increase and decrease in the shares prices like a normal scrip and it is also not in dispute that the said shares were traded in all the years under the stock exchange. Before us, l....
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....nized broker in a recognized Bombay Stock Exchange. The details of such sale and contract note have been submitted before AO/Ld. CIT(A). We take note that when the transactions happened in the Stock exchange, the seller who sells his shares on the stock exchange does not know who purchases shares. According to our knowledge, the shares are sold and bought in an electronic mode on the computers by the brokers and there is also no direct contact at any level even between the brokers. We note that as and when any shares are offered for sale in the stock exchange platform, any one of the thousands of brokers registered with the stock exchange is at liberty to purchase it. As far as our understanding, the selling broker does not even know who the purchasing broker is. This is how the SEBI keeps a strict control over the transactions taking place in recognized stock exchanges. Unless there is a evidence to show that there is a breach in the aforesaid process which fact has been unearthed by meticulous investigation, we are of the opinion that the unscrupulous actions of few players exploiting the loopholes of the Stock Exchange cannot be the basis to paint the entire sale/purchase of ....
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....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. 14. 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. 15. Let us look at certain judicial decisions on similar facts:- 16. 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 was held that: "The fact that the assessees in the group have pur....
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....5) 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." 17. The Hon'ble High Court of Punjab and Haryana in the case of Anupam Kapoor 299 ITR 0179 has held as under:- "The Tribunal on the basis of the material....
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....levant 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 orde....
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....y of these two witnesses 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 fictiti....
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....GA No.747 of 2017; dt. 19 June, 2018, had upheld the order of the 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....
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.... 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 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. Ho....
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....i [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) Ganeshmull Bijay Singh Baid HUF vs. DCIT - ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta & Others vs. ACIT - ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 21. 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 ....