AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (4) TMI 160
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....,36,510/-. Later on, the assessee's case was selected for scrutiny u/s 143(2) of the Act. During the scrutiny proceedings, the Assessing Officer noticed from the computation sheet and details filed by the assessee that assessee had claimed long term capital gain on sale of shares of M/s Unno Industries Pvt. Ltd. The assessee has purchased125 number of shares of M/s Pinnacle Vintrade Ltd, offline, on 06.01.2012 @ Rs. 1000/- per share for Rs. 1,25,000/- from Uniglory Developers Pvt. Ltd. Subsequently, on 23/03/2012 (record date) bonus shares were allotted. After that the said Pinnacle Vintrade Ltd. has been amalgamated withM/s Unno industries Ltd., and 10 shares of Unno Industries Ltd. were allotted for 1 share of Pinnacle Vintrade Ltd. After completion of one year period, the said 1,13,750 shares of Unno Industries Ltd. have been sold on part by part in the month of May, June & July, 2013 through the Broker, M/s. Religare Securities Ltd. for total Rs. 38,20,475/- and earned profit more than 30 times in such a short span of time. The AO noticed that this sharp rise in the value of shares within such a short time does not appear normal. It is more so that too when the general trend in....
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....tive does not hold good. Further, there are many shares which are trading in market, prices of which do not correspond with its financials. Merely on the ground that few brokers were investigated and few enquiries have been made so all the transactions in the script is bogus, is not right more specifically when there is no specific material or evidence is available against the assessee. One should not be held guilty merely on the ground of suspicion or surmise. It is pertinent to note that section 10(38) of Act which categorically states that in order of claim income exempt from tax under section 10(38), the shares are to be sold on the recognized stock exchange, STT has to be paid on the sale consideration and shares are to be held for more than 12 months. The shares were purchased and the payment has been made through the account payee cheque. Purchase bill, bank statement, money receipt, account confirmations were submitted. The shares were sold on Bombay Stock Exchange (BSE) platform through M/s Religare Securities Ltd. Payment for sale of shares was received through the broker in assessee's regular bank account. All the details and documents submitted are verifiable. There is ....
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.... profit and loss account along with investment schedule for the year ended 2013 showing investment in Unno Industries Ltd, along with bonus shares vide PB 56-58. (xi)Contract notes for sale of 1,13,750 shares in Unno Industries Ltd. (PB 59-70). (xii).Demat statement showing sale of 1,13,750 shares of Unno Industries Ltd. (PB 71-73). (xiii).Bank statement reflecting receipt of sale consideration for sale of 1,13,750 shares of Unno Industries Ltd and broker's statementshowing sale and payment consideration for sale of 1,13,750 shares in Unno Industries Ltd. By submitting these plethora documents and evidences, the ld Counsel claimed that the long term capital gain (LTCG) of Rs. 38,02,285/- earned by the assessee is genuine. The transaction has been made by assessee within four corners of law therefore, addition made by assessing officer should be deleted. 8. Based on this facts and circumstances narrated above, we note that this issue is squarely covered by the judgment of Co-ordinate Bench of ITAT Kolkata in the case of Sanjib Kumar Patwari(HUF) in I.T.A. No.205/Kol/2018 for A.Y. 2014- 15, wherein it was held as follows: "12. We have heard both the parties and perused the ....
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.... 210 ITR 103 (Cal), wherein it was held that it is a trite law that cross examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against the party unless the party is put on notice of the case made out against him. Therefore, the addition made by the assessing officer based on thestatement of an alleged entry operator Sri Sunil Dokaniais not sustainable in law, as the assessing officer did not provide an opportunity to the assessee to cross examine the statement of Sri Sunil Dokania. 13. Now, coming to the merits of the assessee`s case, we note that ld Counsel for the assessee submitted before us paper book which contain the documents and evidences in support of the Purchase and sale of shares on which the long term capital gain(LTCG) arose to the assessee. These all documents and evidences were available before the ld CIT(A) as well as before the ld AO. The Assessee submitted before us following documents and evidences in respect of Kailash Auto Finance Ltd. (1) KAILASH AUTO FINANCE LTD. i) Copy of purchase bill dated 12.02.2012, reflecting the purchase of 3,20,000 shares of Careful Projects Advisory Ltd. from Trump Traders Pv....
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....07.2014, 11.07.2014, 15.07.2014, 21.07.2014 and so on; (Paper Book Page No. 66-67) iv) Copy of Contract Notes evidencing the sale of shares of Lifeline Drugs & Pharma Ltd.; v) Copy of bank statement reflecting the transactions of sale of shares of Lifeline Drugs & Pharma Ltd. (Paper Book page No. 59-61) (3) EINS EDUTCEHLTD. (Now Aplaya Creations Ltd.) i)Copy of purchase bill dated 10.08.2013, reflecting the purchase of 50,000 shares of EINS Edutech Ltd. from Neptune Financial Advisory Pvt. Ltd. (Paper Book Page No.7); ii) Copy of Bank Statement reflecting the debit transaction of the amount of Rs. 8,00,000/- paid for the purchase of shares by cheque no. 37644 on 01.08.2013 (Paper Book Page No. 10) iii) Copy of statement of DEMAT account evidencing the debit of shares of EINS Edutech Ltd. on 01.12.2014, 02.12.2014, 06.12.2014, 11.12.2014 and so on; (Paper Book Page No. 63) iv) Copy of Contract Notes evidencing the sale of shares of E1NS Edutech Ltd.; v).Copy of bank statement reflecting the transactions of sale of shares of EINS Edutech Ltd. (Paper Book page No. 59-61) . Therefore, by submitting these plethora documents and evidences, the ld Counsel for the assesse....
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....(Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. (viii) These facts are verifiable from the regular books of accounts. (ix) The transactions can also be verified from the Stock Exchange. (x) The SEBI has cleared these shares and scrips from the allegation of Market Rigging. Hence, the genuineness of the transaction cannot be doubted. 15. Now coming to the allegations made by the Assessing Officer for making the addition. The Assessing Officer alleged in the assessment order that on the basis of information received from the investigation wing, Kolkata, the claim of LTCG u/s 10(38) by the assessee is bogus. In the assessment order, the ld. Assessing Officer has mentioned the story that the list of 84 scrips identified by the investigation wing where price rigging have been found which includes the name of the scrips in which the assessee has earned Long Term Capital Gain. The Assessing Officer alleged that the transactions were pre-arranged to book such gain in the hands of the pre-fixed beneficiaries. The above allegations are generalized and not specific to the case of the assessee. The assessee was asked to....
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....were received through proper banking channel. v) The purchase and sale transactions were subjected to Security Transaction Tax, Service Tax, Brokerage charges and Stamp duty. vi) The share purchase and sale transactions are reflected in the d-mat account. vii) The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. viii) These facts are verifiable from the regular books of accounts. ix) The transactions can also be verified from the Stock Exchange. x) The interim order of SEBI about which the AO has discussed in his order, has been reversed by the final order of SEBI dated 21.09.2017,where the SEBI has cleared the assessee from the allegation of Market Rigging. Therefore, so far first allegation of the assessing officer is concerned, the assessee has proved beyond any doubt that assessee is a regular investor in shares and securities. The shares were purchased and sold through a Registered Broker named "Eureka Stock & Share Broking Services Ltd." in the Stock Exchange. The shares were purchased and sold based on the prevailing market condition. The payments were received through proper ban....
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....ies vs. CCE - [2015] 62 taxmann.com 3 (SC) (ii) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (iii) ACIT vs. Amita Agarwal & Others - ITA No. 247/(Kol) of 2011 (Kol ITAT) (iv) ITO vs. BijayaGanguly- ITA Nos. 624 & 625/Kol/2011 (Kol ITAT) (v) GaneshmullBijay Singh Baid HUF vs. DCIT - ITA Nos. 544/Kol/2013 (Kolkata ITAT) (vi) Rita Devi & Others vs. DCIT - IT(SS))A Nos. 22-26/Kol/2011 (Kol-ITAT) (vii) Malti Ghanshyambhai Patadia vs. ITO - ITA No.3400/Ahd/2015Ahmedabad ITAT) (viii) Pratik Suryakant Shah vs. ITO - [2017] 77 taxmann.com 260 (Ahmedabad ITAT) Therefore, the addition made by the assessing officer based on the statement of an alleged entry operator Sri Sunil Dokania is not sustainable in law, as the assessing officer did not provide an opportunity to the assessee to cross examine the statement of Sri Sunil Dokania. Coupled with this, the CBDT's circular dated 10.03.2003 itself made it clear that such admissions or statements without any tangible evidence found during search carry no significance. 16. We note that Securities Exchange Board of India (SEBI) is an authority which regulates the listed companies. The SEBI controls listed companies....
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....n the serial no. 154. Therefore, the SEBI itself has freed the assessee from market rigging allegation and thus the assessee is proved to be a bona-fide investor not involved in any malicious activities. Hence, considering the above, it is abundantly clear that no doubt can be arisen about the shares being penny stock. 17. We note that the assessee had never entered into any transaction with Sri Sunil Dokania against whom investigation wing had allegedly made inquiry. We also note that in the extracts of the statement of Sri Sunil Dokania given in the Show Cause notice, it is nowhere mentioned that the alleged person has provided any entry to the assessee directly. The statement talks about the entries provided by him to preferential allottees and the modus operandi adopted by him for providing the bogus LTCG. The assessee being a genuine investor was unaware of the fact that any such activity was undertaken in the scrips purchased by him. He was nowhere, associated with the person alleged to provide the entries as alleged by the AO. We also note that SEBI has given a clean chit to the company and has freed it from the allegation of market rigging. Therefore, the allegation of th....
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....ssions, the ld Counsel, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (i) Baijnath Agarwal vs. ACIT - [2010] 40 SOT 475 (Agra (TM) (ii) ITO vs. Bibi Rani Bansal - [2011] 44 SOT 500 (Agra) (TM) (iii) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agra/2009 (Agra ITAT) (iv) ACIT vs. Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (v) Rita Devi & Others vs. DCIT - IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vi) Surya Prakash Toshniwal vs. ITO - ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (viii) Ms. Farrah Marker vs. ITO - ITA No. 3801/Mum/2011 (Mumbai ITAT) (ix) Anil Nandkishore Goyal vs. ACIT - ITA Nos. 1256/PN/2012 (Pune ITAT) (x) CIT vs. Sudeep Goenka - [2013] 29 taxmann.com 402 (Allahabad HC) (xi) CIT vs. Udit Narain Agarwal - [2013] 29 taxmann.com 76 (Allahabad HC) (xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xiii) CIT vs. Himani M. Vakil - [2014] 41 taxmann.com 425 (Gujarat HC) (xiv) CIT vs. Maheshchandra G. Vakil - [2013] 40 taxmann.com 326 (Gujarat HC) (xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajas....
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....ection 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs.Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT - ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT - [2006] 6 SOT 247 (Mum) 23. We note that the ld. D.R. for the Revenue had heavily relied upon the decision of the Hon'ble Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017. We note that in the case relied upon by the ld. D.R,we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was 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 ....
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....ee were not genuine. (iv) 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 ld AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon'ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the claim of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. (v).The Hon'ble High Court of Calcutta in the case of ALPINE INVESTMENTS ITA 620 of 2008, dated 26thAugust 2008, 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 S....
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....y the ld. CIT(A). However, we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence." (vii).M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal- HC) In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon'ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. (viii)CIT V. Lakshmangarh Estate & Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) - In this case the Hon'ble Calcutta High Court held that ....
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....counts and produced documents showing all payments were received by the assessee through banks. In these circumstances, the long term capital gain (LTCG) earned by the assessee should not be treated as bogus, as held by the Coordinate Benches of ITAT Kolkata, in the following cases: (i). Mr. Sanjiv Shroff, I.T.A. No. 1197/Kol/2018, Assessment Year: 2014-15, order dated, 02.01.2019 "28. We note that since the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (xx) Baijnath Agarwal vs. ACIT - [2010] 40 SOT 475 (Agra (TM) (xxi) ITO vs. Bibi Rani Bansal - [2011] 44 SOT 500 (Agra) (TM) (xxii) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agra/2009 (Agra ITAT) (xxiii) ACIT vs. Amita Agarwal & Others - ITA No....
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....09 (Agra ITAT) (iv) ACIT vs. J. C. Agarwal HUF - ITYA No. 32/Agr/2007 (Agra ITAT) 30. Moreover, it was submitted before us by ld AR that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in CSE. The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (v) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT) (vi) ACIT vs.Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (vii) Lalit Mohan Jalan (HUF) vs. ACIT - ITA No. 693/Kol/2009 (Kol ITAT) (viii) Mukesh R. Marolia vs. Addl. CIT - [2006] 6 SOT 247 (Mum) 31. We note that the ld. D.....
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.... Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus nor the AO had issued any notice to the brokers for confirmation. The facts of the case and the evidence 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 exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. In the aforesaid facts and circumstance, for allowing the appeal 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 fac....
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.... days) through in order to get the benefit of claim of Long Term Capital Gain the holding period is required to be 365 days The Assessing Officer as well as the Commissioner (Appeals) have rejected these evidences filed by the assessee by referring to 'Modus Operandi' of persons for earning long term capital gains which is exempt from income tax. All these observations of Investigation wing were general in nature and were applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assessee were not controverted by the revenue authorities. No evidence collected from third parties was confronted to the assessees. No opportunity of cross-examination of persons, on whose statements the revenue relied to make the addition, was provided to the assessee. The addition is made based on a report from the investigation wing. The issue for consideration is whether, in such cases, the legal evidence produced by the assessee has to guide decision in the matter or the general observations based on statements, probabilities, human behaviour and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, ....
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....tion wing suggests, there are more than 60,000 beneficiaries of LTCG. Each case has to be assessed based on legal principles of legal import laid down by the Courts of law Just the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Assessing officer as well as the Commissioner (Appeals) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However, the Assessing Officer as well as the Commissioner (Appeals), have brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a part of any arrangement for the purpose of generating bogus long term capital gains. No....
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....probabilities no material was brought on record by the Assessing Officer to controvert the evidence furnished by the assessee. Under these circumstances, the evidence filed by the assessee is accepted and the claim that the income in question is a bona fide Long Term Capital Gain arising from the sale of shares is allowed and hence exempt from income tax. [Para 20]" 26. To conclude, we note that SEBI has given a clean chit to the company and has freed it from the allegation of market rigging. Therefore, the allegation of the AO itself becomes infructuous. Further, the assessee had also requested for an opportunity to cross examine Sri Sunil Dokania, whose statement has been relied on by the AO for making the addition. However, the Ld. AO did not provide any opportunity for cross examine, the so-called operators. It is well established law that no adverse view can be taken against an assessee, on the basis of statement recorded by department of any person without providing copy of the statement to the assessee and also without providing opportunity for cross examination of the said person.We note that the assessee had never entered into any transaction with Sri Sunil Dokania, agai....