TaxTMI 
TaxTMI 
2019 (8) TMI 769
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.... Rs. 11,78,596/- which the assessee claimed as exempt u/s 10(38) of the Act. Thereafter, the AO issued show cause notice (SCN) to the assessee wherein the AO raised the doubts about the claim of the assessee. Since according to the AO the investigation report of the department states that 84 penny stock companies in active connivance of 32 share broking entities were involved in pre-planned LTCG/STCL for beneficiaries like assessee by which transactions, the beneficiaries / assessee's ill gotten money is converted LTCL and have claimed exemption from tax. Thereafter, the AO took the aid of a chart to show the price fluctuation. Though the assessee contested the allegation made by the AO in the show cause notice and asked for the reports of the Investigation Wing, the AO did not dealt with it and was of the opinion that the assessee is silent regarding the bell shaped pattern emerging from the trading result of the scrip and thereafter he discussed the modus operandi adopted by unscrupulous brokers hand in blow with the penny stock companies to convert the black money white of beneficiaries like assessee. Thereafter, the AO disallowed the claim of the assessee and made an addition o....
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....eby it is common knowledge that only the share brokers registered with SEBI can enter in to a transaction on the stock exchange/electronic platform and transaction of purchase and sale takes place in a fraction of time from anywhere in India on behalf of brokers' clients or on brokers own account. As per common knowledge on the subject, all such activity or purchase and sale on the platform of the stock exchange are logged on real time basis and that it is not possible to sell/purchase the shares of any company on the stock exchange in variance to the prevailing market price at any point of time. Hence, the assumption is that assessee neither knows the buyer nor it would be able to know the identity of the persons who has sold the shares at the time of purchase of the shares and purchaser of the shares at the time of sale of the shares at the stock exchange. 8. It is noted that the A.O's allegation of conversion of unaccounted money in the form of alleged bogus long term capital gains is not based on any incriminating materials directly against the assessee and her broker. We note that the A.O/ld. CIT(A) has made the addition on the basis of suspicion and conjectures which they ....
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.... transactions cannot be and should not be treated as ingenuine merely on arbitrary view of suspicion as held in the following cases: (i) CIT vs. Carbo Industries Holdings Ltd. 244 ITR 422 (Cal) (ii) CIT vs. Emerald Commercial Ltd. 250 ITR 539 (Cal) (iii) Manish Kumar Baid vs. ACIT, order dated 18.08.2017; ITANo. 1236-1237/K/12 (iv) Vasudha Jain vs.ITO, ITA No. 1018/K/2018, order dated 15.02.2019 (v) Prakasho Devi Saria vs. ITO, ITA No. 2360/K/2017, order dated 17.05.2019 (vi) CIT vs. Bhagwati Prasad Agarwal (Calcutta High court); ITA No.22 of 2009, dated 29.04.09. 12. It is noted that the A.O has nowhere in the assessment order referred to any material which can prove the complicity of assessee in the alleged accommodation entry operation. In the light of the documents furnished by the assessee, the authorities below were not justified in invoking the provisions of section 68 of the Act in regard to the sale proceeds of shares. There is no evidence on record to disbelieve that the shares sold through registered share and stock broker. The assessee had produced all evidences to explain the source of the amounts received by ....
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....hand 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 reflecting purchase, (e) evidence of sale of shares through the stock exchange, (f) copy of demat statement showing the sale of shares, (g) copy of bank statement reflecting sale receipts, (h) copy of brokers ledger, (i) copy of Contract Notes etc. 7. The proposition of law laid down in these case laws by the Jurisdictional High Court as well as by the ITAT Kolkata on these issues are in favour of the assessee. These are squarely ....
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....M/s. Magasagar Securities Pvt. Ltd. (a company in the Mahasagar Securities Pvt. Ltd. group share scam case) of Rs. 10,32,289/-. Subsequently the assessment was completed u/s. 147 r.w.s. 143(3) of the Act after making an addition of Rs. 10,39,289/- on account of bogus share transactions and Rs. 20,786/- being commission paid to the broker for arranging accommodation entries in the form of share transactions. The AO had given a finding that the assessee had taken entries from Mahasagar Securities Pvt. Ltd. involved in the shares scam case for Rs. 10,39,289/- for bogus speculation profit during the financial year 2007 -08. It was further found by the AO that the assessee has paid cash of equivalent amount and received back by cheque and bogus contract notes and bills for the transactions not actually rooted through stock exchange. It is noted that the ITAT, Mumbai had relied upon and followed the judgment of Hon'ble Bombay High Court in Sanjay Bimalchand Jain v. PCIT, Order dated 10.04.2017 (Bom.), being judgment of Jurisdictional High Court. However, in this case, the AO observed that the assessee had taken entries and paid cash of equivalent amount and received back by cheque. ....
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....the apex court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC); Durga Prasad More v. CIT [1971] 182 ITR 540 (SC) and MC. Dowell & Co. Ltd. v. CTO [1985] 154 ITR 148/22 Taxman 11 (SC), besides by the Tribunal in the case of Asstt. CIT v. Som Nath Maini [2006] 7 SOT 202 (Chd.), he assessed the impugned credit of Rs. 12.15 lacs as unexplained income u/s. 68 of the Act. The Tribunal confirmed the addition observing that the purchase of shares was off market purchase not reported in the stock exchange. Further, it was observed by the Tribunal that the purchase was through a back date contract note in cash and, there was no trail. Thus it is noted that Tribunal in this case confirmed the addition on a factual finding that the purchase was through a back dated contract note in cash and, there was no trail. This fact is not applicable in the present case. Further, it is noted that the abovementioned judgment of Tribunal, Mumbai Bench was considered/distinguished by the Mumbai ITAT in its following judgments while allowing similar issue in favour of the Assessee: a. DCIT vs. Anil Kainya [ ITA Nos.4077 & 4078/MUM/2013, Order dt. 22.03.16 Mum ITAT)] ....
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....eptable and the act of the assessee in purchasing the penny stock shares and sale of fee within the ambit of adventure in the nature of trade. Consequently, amount in question was liable to be taxed under the head 'business income'. The Tribunal confirmed the addition by observing that the department had brought sufficient material on record to demonstrate that unaccounted money was introduced in the books of account through long-term capital gain by adopting such method. It is noted that in the aforesaid case, the Tribunal confirmed the addition on a factua1 finding that the department had brought sufficient material on record to demonstrate that unaccounted money was introduced in the books of account through long-term capital gain by adopting such method. This fact is not applicable in the present case. Further, the abovementioned judgment has been considered/distinguished by this Tribunal, inter-alia, in the following cases while allowing similar issue in favour of the Assessee: a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (KoI ITAT)] b. Yogesh Dalmia vs. ACIT [ITA No.113/Kol/2018, Order dt. 03.06.2019 (KoI ....
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....r: " ..... On appreciation of the evidence, the Tribunal held that the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares. Once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee under Section 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained. 9. In view of the findings of fact recorded by the authorities below which could not be demonstrated to be erroneous or perverse in any manner, no interference is called for. " However, in the instant case of the Assessee company all relevant documents were furnished to support and prove beyond all doubts, purchases as well as sale of shares. Further this judgment has been considered and distinguished by this Tribunal and other Benches of the Tribunal, inter-alia, in the following cases while allowing similar issue in favour of the Assessee: a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (Kol, ITAT)] b. Kamal Singh Kundalia vs. ITO [ITA No.23....
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....terials and/or evidence to support its transactions of purchase and as well as sale of shares and the AO had failed to point out any defect and/or lacuna in the said documents, materials and/or evidence. Further, this Tribunal in its orders had decided similar issue in favour of the assessee by relying on binding judicial pronouncements. Reference is also made to the recent judgment dated 1st July, 2019 rendered by the Tribunal in the case of Aparna Miwsra, supra wherein the Tribunal had relied upon the following jurisdictional Calcutta High Court judgments to decide similar issue in favour of the assessee. i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] ii)CIT vs. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) iii) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738-ITA No. 22 of 2009, Order dt. 29.4.09] 11. Coming to the cases given below Prem Jain vs. ITO [ITAT, Delhi, Order dt. 22.03.....
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.... taxes on the gains arising from sale of shares. All these judgments are irrelevant and has no application to the facts of the instant case before the Tribunal. 13. Coming to the case of SEBI v. Rakhi Trading P. Ltd [Civil Appeal No.1969 of 2011, Judgment dated 8th February, 2018 (of the Hon'ble Supreme Court ) It is noted that the Hon'ble Supreme Court was concerned with a case where SEBI had initiated actions against few traders and brokers for violation of Regulations 3(a), (b) and (c) and 4 (1), (2)(a) and (b) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("the PFUTP Regulations"). In the said case, the Hon'ble Apex Court upheld the action initiated in the case of traders as the said traders have admitted of being involved in synchronized trade to manipulate the prices of shares. There is no such admission by the Assessee in the instant case that it has involved in any price manipulation and/or any dubious tax planning. Moreover, the Hon'ble Apex Court had set aside the action initiated by SEBI in the case of brokers as there was no evidence on record to s....