TaxTMI 
TaxTMI 
2020 (4) TMI 160
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....14,declaring total income to the tune of Rs. 22,36,510/-. 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. I....
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....alue of shares when general trend in the market is negative 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 de....
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....hares of Unno Industries Ltd, allotted to the assessee after scheme of arrangement (vide PB 53-55). (x). Balance sheet and 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 S....
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....ade the basis of the impugned order is a serious flaw which makes the order nullity. We note that same view expressed by the Hon`ble Calcutta High Court in the case of Eastern Commercial Enterprises 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....
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....Copy of Bank Statement reflecting the debit transaction of the amount of Rs. 12,00,000/- paid for the purchase of shares,by cheque no. 037632 on 01.10.2012 (Paper Book Page No. 8) iii) Copy of statement of DEMAT account evidencing the debit of shares of Lifeline Drugs & Pharma Ltd. on 01.07.2014, 08.07.2014, 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....
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.... on the prevailing market condition. (iv) The purchase and sale of shares are supported by contract notes. The payments 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 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. A....
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.... regard it was submitted by the assessee before the assessing officer as follows: i) The assessee is a regular investor in shares and securities as evident from past assessment records. ii) The shares were purchased and sold through a Registered Broker named "Eureka Stock & Share Broking Services Ltd." in the Stock Exchange. iii) The shares were purchased and sold based on the prevailing market condition. iv) The purchase and sale of shares are supported by contract notes. The payments 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 r....
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....note that the fact that neither the statement relied on bythe authorities below were provided to the assessee nor any cross examination was allowed to prove the veracity of the statement. We note that the fact that in the statement of third party, the name of the assessee was not implicated. Even otherwise, according to Learned Counsel, no adverse inference could be drawn against the assessee on the basis of untested statements without allowing opportunity of cross-examination. For that we rely on the following judgements in support of the aforesaid view:- (i) Andman Timber Industries 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....
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.... The revocation of the directions issued vide the above mentioned orders (at paragraph 7) is only in respect of the entities mentioned at paragraph 5 of this order in the matter of Kailash Auto. As regards remaining entities in the scrip of Kailash Auto, violations under SEBI Act, PFUTP Regulations, etc., were observed and SEBI shall continue its proceedings against them. Hence, the directions issued vide confirmatory order dated June 15, 2016 against the remaining 2 entities shall continue. This revocation order is without prejudice to any other action SEBI may initiate as per law." We note that in the above order of the SEBI, the name of the assessee is also mentioned in 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 th....
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....s own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion howsoever strong it may appear to be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. 20. 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 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(S....
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....o. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF - ITA No. 32/Agr/2007 (Agra ITAT) 22. Moreover it was submitted before us by ld Counsel 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 BSE/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 :- (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. ....
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....n'ble Calcutta High Court affirmed the decision of this tribunal, wherein, the tribunal allowed the appeal of the assessee where the ld AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the ld 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 ld AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the ld AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (iii) CIT V. Andaman Timbers Industries Ltd [ITA No. 721of 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 ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee 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....
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.... 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 and 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 discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by 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....
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.... (SC), the Supreme Court held that the doctrine of binding precedent has merit of promoting certainty and consistency in judicial decisions. As per the doctrine of precedent, all lower Courts, Tribunals and authorities exercising judicial or quasi-judicial functions are bound by the decisions of the High Court within whose territorial jurisdiction these Courts, Tribunals &authorities functions. Therefore, respectfully following the judgments of the Jurisdictional, Hon`ble High Court of Calcutta, on similar and identical facts, the addition made by assessing officer should be deleted. 25. We note that when the transactions were as per norms prescribed by SEBI and concerned stock exchange and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. AO did not doubt the genuineness of the documents submitted by assessee. The ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. The assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through ban....
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....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 judgments while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny ....
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.... bench of the Tribunal has deleted the addition and allowed the claim of LTCG on sale of shares of M/s KAFL. We, therefore, respectfully following the same, and set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and delete the consequential addition." (ii) Jagmohan Agarwal Vs. ACIT, ITA No.604/Kol/2018, order dated 05.09.2018. "35.In the light of the documents stated in para 30 at Page14(supra) we find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statem....
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....income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition." (iii).Navneet Agarwal, ITA No.2281/Kol/ 2017, order dated 05.09.2018 "The assessee in this case had stated that the assessee was allotted of 50000 equity shares of SCITIL. The payment for the allotment of shares was made through an account payee cheque (copy of the bank statement evidencing the source of money). Annual return no. 20B was filed with Registrar of companies by SCITIL showing the assessee's name as shareholder. The assessee lodged the said shares with the Depository ESSBSL with a Demat request. The said shares were dematerialized and copy of demat request slip along with the transaction statement is placed on record. Later on, the High Court approved the scheme of amalgamation of SCITIL with CSL. In accordance with the said scheme of amalgamation, the assessee was allotted 50000 equity shares of CSL. The demat shares are reflected in the transaction statement of the period from 1-11-2011 to 31-12-2013. The assessee sold 50000 shares through her broker SKP which was a SEBI registered broker and earned a Long Term Capital Gain. Copy of Form No. 10D....
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....nation has to be provided to the assessee, if the Assessing Officer relies on any statements or third party as evidence to make an addition. If any material or evidence was sought to be relied upon by the Assessing Officer, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behaviour by the department. It is well settled that evidence collected from third parties cannot be used against an assessee unless this evidence is put before him and he is given an opportunity to controvert the evidence. In this case, the Assessing Officer relied only on a report as the basis for the addition. The evidence based on which the DDIT report was prepared is not brought on record by the Assessing Officer nor is it put before the assessee. The submission of the assessee that she is just an investor and as she received some tips and she chose to invest based on these market tips and had taken a calculated risk and had gained in the process and that she is not party to the scam etc., has to be controverted by the ....
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.... held to be guilty or linked to the wrong acts of the persons investigated. In this case, the Assessing Officer at best could have considered the investigation report as a starting point of investigation. The report only informed the Assessing Officer that some persons may have misused the script for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. However, the Assessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. The Assessing Officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact, in this case nothing has been found against the assessee with aid of any direct evidences or material against the assessee despite the matter being investigated by various wings of the Income Tax De....
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....ere assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange.It is clear from the above that the facts of the case of the assessee are identical with the facts in the cases wherein the co-ordinate benches of this Tribunal has deleted the addition and allowed the claim of LTCG. The assessee`s case is also covered by the various judgments of Jurisdictional High Court of Calcutta, as noted (Supra). We, therefore, respectfully following the same, set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and hence we delete the addition of Rs. 7,12,89,467/-. 27. The next issue in ITA No.205/Kol/2018, for A.Y. 2014-15 is in relation to confirming the addition of Rs. 57,02,785/- as unexplained expenditure towards commission charges of sale of such shares by the operator. We have already held that the transactions relating to LTCG were genuine and not the accommodation entries as alleged by the AO. Consequently, the addition of Rs. 57,02,785/- is hereby directed to be deleted. We accordingly hold that the issue is allo....
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....,000/- 4,39,13,859/- 4,28,63,859/- 3. & Pharma Ltd. EINS Edutech 14,700 2,35,200/- 58,37,526/- 56,02,326/- Total 7,12,89,467/- Document 3 Details of Purchase of Investments: Name of No. of Date of Amount Purchased Name of Paid the Company Shares Purchase of From/ Stock Through purchased Purchas Name of Exchange es Broker 7,34,000 09.10.2012 & 7,34,000 Trump Off Market Banking 10.02.2012 Traders, Pvt. Channel Ltd. Kailash Auto (12,20,000 shares of Finance Ltd. Careful Projects Advisory Ltd.) 1,76,000 01.10.2012 10,50,000 Purchased Off Market Lifeline Drugs & Pharma Ltd. Through Private Placement made by the EINS Edutech Ltd. 14,700 10.08.2013 2,35,200 Details of Sale of Investments: company Neptune Financial Advisory Pvt. Ltd. (50,000 shares) Off Market Name of No. of Date the Shares Sales of Amount Sales Company Kailash Auto Sold 7,34,000 of Name of Broker Name of Paid Stock Through Exchange Various 2,35,57,282/- Eureka ....