TaxTMI 
TaxTMI 
2019 (8) TMI 1321
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....chased 12,500 shares of M/s. Panhshul Marketing Ltd. at a price of Rs. 25,000/- on 07.03.2013. Pursuant to the merger of Panhshul Marketing Ltd. with Kailash Auto Finance Ltd., 12,500 shares of Kailash Auto were allotted to the appellant in the ratio of 1:1. The said shares were later sold at a price of Rs. 5,18,881/-, which according to assessee, resulted in Long Term Capital Gains and so the assessee claimed exemption u/s 10(38) of the Act of Rs. 4,93,881/-. However, the AO relying on the report of the Investigation Wing, Kolkata alleged that the claim of assessee of exempt income (LTCG) was bogus in nature. The AO further alleged that the transactions in the scrip of Kailash Auto Finance Ltd. (KAFL) were being manipulated by entry operators and the share prices were hiked artificially to earn LTCG. So, the AO did not accept the assessee's claim of LTCG and exemption thereof claimed by the assessee. Thereafter, the AO treated the same as cash credit u/s 68 of the Act and added the entire LTCG to the income of the assessee as unexplained income. On first appeal, the Ld. CIT(A) dismissed the grounds raised by the assessee against his claim of exemption u/s 10(38) of the Act a....
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....e ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon'ble High Court in May 2013 merely based on a statement given by a third party which has not been subject to cross -examination. Moroever, it is also pertinent to note that the assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transactions of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the lower authorities apart from placing the copy of SEBI's interim order supra. We find that the SEBI's orders relied on by the ld AO and referred to him as direct evidence against the assessee did not contain the name of the assessee and/or the name of Ashika Stock Broking Ltd. ....
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....e. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the assessee." 7. Coming back to the instant case, it is noted by me that the assessee had purchased 12,500 shares @ Rs. 2/- each of M/s. Panchshul Marketing Ltd. on 07.03.2013 (merged with M/s. Kailash Auto Finance Ltd. [hereinafter M/s. KAFL] on09.05.2013) for a consideration of Rs. 25,000/- from M/s. Shiv Shakti Exports Pvt. Ltd. in an off market transaction. It is clarified that off market transaction has not been prohibited and if carried out legally cannot be held to be bogus only on this count. It is further noted that the said shares were later sold at a price of Rs. 5,18,881/- in the Stock Exchange of Bombay, which according to assessee, resulted in Long Term Capital Gains after remitting STT and so the assessee claimed exemption u/s 10(38) of the Act of Rs. 4,93,881/-. It is noted that the assessee has paid the amount of Rs. 25,000/- ....
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....hen 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 is the purchasing broker. This is how the SEBI keeps a strict control over the transactions taken 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, I am of the opinion that the unscrupulous actions of few players exploiting the loopholes of the Stock Exchange, if any, cannot be the basis to paint the entire sale/purchase of a scrip like that of M/s. KAFL as bogus without bringing out adverse material specifically against the assessee. 9. The Ld. CIT(A) in his order has observed that the appellant was unable to sufficiently prove that the shares were held in demat form. This finding however appears to be erroneous. I note that the appellant had furnished the Demat holding statement for the year 2013 evidencing that the appellant held 12,500 shares of Panchshul Marketing Pvt Ltd, which is available at Page 18 of the ....
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.... assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that AssesseeCompany was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the....
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....es of Limtex and Konark Commerce & Ind. Ltd., assessee's account with P.K. Agarwal & co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax....
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....ble to find fault/infirmity with the same. I note that the source of the receipt of the amount has been explained and the transaction in respect of which the said amount has been received by assessee has not been cancelled by the stock exchange/SEBI. So, it is difficult to countenance the action of AO/Ld. CIT(A) in the aforesaid facts and circumstances explained above. 13. Even assuming that the brokers may have done some manipulation then also the assessee cannot be held liable for the illegal action of the brokers when the entire transactions 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. 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 refers also to some third party statement of Shri Sunil Dokania which was admittedly recorded behind the back of the assessee and the assessee has neither been allowe....
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....ash credits in the,bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, yn the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) &Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TTJ (Nag) 818 affirmed; SumatiDayal 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. PushpaMalpani - 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 ....
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....y the CIT(A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof. Consequently, no question of law, much less a substantial question of law, arises for adjudication.- C. Vasantlal& Co. vs. CIT (1962) 45 ITR 206 (SC), M.O. Thomakutty vs. CIT (.1958) 34 ITR 501 (Ker)) and Mukand Singh vs. Sales Tax Tribunal (1998) 107 STC 300 (Punjab) relied on; Umacharan Shaw &Bros. vs. CIT (1959) 37 ITR 271 (SC) Applied; Jaspal Singh vs. CIT (2006) 205 CTR (P & H) 624 distinguished" 18. The Co-ordinate Bench of Ahmedabad in the case of Smt. SunitaJalanVs. ITO in ITA Nos. 501 & 502/Ahd/2016 dated 09.03.2017 had the occasion to consider a similar issue which was wherein the assessment was framed on the strength of the statement of a broker. The relevant part reads as under:- "14. The entire assessment is based upon the statement of Shri MukeshChoksi. 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 s....
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.... to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony 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, t....
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....he company. The profit earned by the assessee was shown as capital gains which were not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 20. It is clear from the above that the facts of the case of the assessee are identical with the facts in the above case wherein the co-ordinate bench of the Tribunal has deleted the addition in the case of Shri Manish Baid (supra) in respect of sale of shares of M/s KAFL. I, therefore, respectfully following the same and the facts in the instant case as taken note in para 7 supra and discussions, is inclined to set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital on sale of shares of M/s KAFL as bogus and delete the consequential addition. 21. Before I part, I would like to deal with the case laws cited by Ld. DR in revenue support. I note that the said judicial pronouncements are all distinguishable on facts as well as on la....
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....m.), 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. And on the basis of such adverse inference, the Tribunal confirmed the addition made by the AO. However, in the present case in hand, there is no such finding made by the AO. Further. It is noted that the abovementioned judgment of ITAT, Mumbai Bench has been considered and distinguished by the ITAT, Kolkata Benches and other Benches of the Tribunal, inter-alia, in the following cases: a. Satyanarayan Saria vs. ITO [ITA No.1224/KoIl2016, Order dt. 28.06.2019 (Kol ITAT)] b. Kaushalya Agarwal vs. ITO [ITA No.194/KoIl2018, Order dt. 03.06.2019 (Kol, ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) Reference is also made to the recent judgment dated 01.07.2019 rendered by this Tribunal in the case of Aparna Misra Vs. ITO (ITA No. 161/Kol/2019) 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. CI....
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....umbai 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)] b. Anjali Pandit vs. ACIT [2017] 88 taxmann.com 657 (Mumbai - Trib.) Further, it is noted that lthe said judgment has been considered/distinguished by the Kolkata 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. Anupama Garg vs. ITO [ITA NO.5971/0el/2018, Order dt. 12.12.2018 (Del, ITAT)] c. Radhika Garg. vs. ITO [ITA No.4738/0el/2018, Order dt. 01.01.2019 (Del-Trib) 4. Coming to the case of Vidya Reddy - ITA No.126/Chny/2017 -Chennai ITAT had disallowed the claim of exempt LTCG and had confirmed the addition made on the ground that the assessee has not placed any material before the lower authorities to prove that her transactions are genuine. The Tribunal observed "She has also not placed any material to prove that her claim of exemption u/s. 10(38) is genuine and valid." However,....
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....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 ITAT)] c. Navin Kumar Kajaria vs. ACIT [ITA No.1254-55/Kol/2018, Order dt. 03.04.2019 (Kol- Trib) d. Soumitra Choudhury vs. ACIT [ITA No.256/Kol/2019, Order dt. 15.03.2019 (Kol ITAT)] 6. Coming to the case of Abhimanyu Soin [2018-TIOL-733-ITAT-CHD - The Chandigarh Bench of Tribunal had confirmed the addition made by AO after observing that "11. The assessee has failed to prove that the purchase and sale transactions are genuine and could not even furnish and iota of evidence regarding the sale of shares .............". However, in the case of the Assessee Company all relevant documents were furnished to support, and prove beyond all doubts, purchases and as well as sale of shares, which was evidently absent in that case, so is not applicable to case in hand. 7. Coming to the case of Balbir Chand Maini Vs. CIT (2011) 12 taxmann.com 276 (P&H) - The Hon'ble Punjab & Haryana High Court had confirmed the addition made by Assessing Officer on the basis of f....
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....ing 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.2359/Kol/2017, Order dt. 08.05.2019 (Kol ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) 9. Coming to the case of CIT vs. Sunita Dhadda (Hon'ble Supreme Court judgment dated 06.06.2018), it is noted that this judgment relied upon by the department has no application in the facts of the instant case. The contention of Ld. DR that matter should be set aside to AO for supplying the Assessee with Investigation Wing Report and statements of parties relied upon cannot be applied in each and every case. The assessee company had in the case in hand discharged the onus casted upon it to prove the claim of LTCG/STCL, then it was the bounden duty of the AO to bring out the falsity/fabrication/wrong doing if any on the part of assessee or confront the assessee with any material which is adverse against the assessee and to proceed in accordance to law i.e. in confronting with principle of Natural Justice without doing so, and when assessee placed all documentary evidences be....
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.... 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. 22.03.2018] Sanjay Bimalchand Jain vs. PCIT [2018] 89 taxmann.com 196 (Bom) The decisions of these cases had been relied upon by D/R to contend that gains from sale of shares should be assessed as "Business income" and not under the head "Capital Gains". It is noted that the Learned D/R is trying to put forward a completely new argument which do not emanate out of the orders of the lower authorities and also from the records of the case and thus is not permissible to be raised as this stage. Even otherwise, the ITAT, Delhi Bench in Prem Jain (supra) had held when the facts of the case was that the Assessee had claimed the income from sale of shares to be assessed at business profits and not capital gains where there was short duration of holding of shares and lack of clarity in account books, sale and purchase of shares. In such facts of the case, it was held that profits from sale of shares would amount to business income and not short term capital gain. However, no such ca....
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....e 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 show involvement of the said brokers. Similarly in the instant cases the department had failed to bring on record any evidence whatsoever to show that the Assessee was involved in any price manipulations. Thus the judgment of the Hon'ble Supreme Court is clearly distinguishable on facts. The said judgment had been held to be distinguishable by the ITAT, Kolkata Benches in the following judgments:- i. Suman Saraf v. ITO in ITA No.1395/KoI/2018, Order dated 05.10.2018. ii. Jignesh Desai v. ITO in ITA No.1394/KoI/2018, Order dated 05.10.2018. iii. Rishab Jain v. ITO in ITA No.1392/KoI/2018, Order dated 05.10.2018. iv. Rekha Devi v. ITO in ITA NO.1269/KoI/2018, Order dated 05.10.2018. v. Sunita Devi v. ITO in ITA No. 1268/Ko1/2018, Order dated 05.10.2018. vi. Jagat Lal Jain v.ITO in ITA No.1226/KoI/2018, Order dated 05.10.2018. vii. Sneha Choudhary v. ITO in ITA NO.1218/KoI/2018, Order dated 05.10.2018. viii. U.C.Choudhary & ....