TaxTMI 
TaxTMI 
2021 (3) TMI 1169
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....,61,303/- which has been claimed exempt u/s 10(38) of the Act. 2.1 During the year under consideration, the assessee had sold 7,50,000 shares of M/s Radford Global Ltd. for a total consideration of Rs. 5,99,40,819/- against the purchase of 1,50,000/- shares at Rs. 22,50,000/- resulting into long term capital gains of Rs. 5,76,90,819/-. The assessee was allotted 1,50,000/- preferential shares on 20.1.2012 at a price of Rs. 15/- per share which included premium of Rs. 5/- per share. Subsequently, these shares were split and the assessee was allotted 7,50,000 shares of M/s Radford Global Ltd., formerly known as M/s P.S. Global Ltd. These shares were sold through M/s Vivek Financial Focus Ltd. In addition to the above, the assessee also sold 55,000 shares of M/s V&K Software Ltd. (now known as USG Tech Ltd.) for a total consideration of Rs. 7,13,384/- whereas these shares were purchased at a price of Rs. 42,900/- resulting into long term capital gain of Rs. 6,70,484/-. 2.2 In the assessment order, the Assessing Officer (AO) noted that as per the investigation report of Pr. DIT (Inv.) Kolkata, the assessee was one among the beneficiaries in the list by accepting bogus long term ca....
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....rading, the trading volumes in the scrip were very low and the substantial increase in traded volumes as observed in this case was mainly due to their trading. I further note that Radford Group & Suspected Entities and allottees traded amongst themselves as substantiated by their matching contribution to net buy and net sell in patch I. there was no change in the beneficial ownership of the substantial number of traded shares as the buyers and sellers both were part of the common group and were acting in league/concert to provide LTCG benefits to the allottees. In view of the above, I prima facie find that Radford Group & Suspected Entities and allottees used securities market system to artificially increase volume and price of the scrip for making illegal gains to an to convert ill gotten gains into genuine one". 2.3 A show cause notice dated 2.12.2016 u/s 142(1) of the Act was issued to the assessee and reply dated 12.12.2016 was filed wherein the assessee contended as under: "a) That the said order only pertained to scrip Radford Globals Ltd. and not to scrip V&K Software; b) That the said order is not final order but only an interim order and hence could no....
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.... 26.6.2013 35000 10000 2500 12500 22500 27.6.2013 80000 32000 28000 60000 20000 28.6.2013 50000 12318 16308 28626 21374 2.7.2013 105265 71878 8387 80265 250000 3.7.2013 105890 67940 37950 105890 ---- Total 838874 844504 205496 750000 88874 Percentage of total share sold 73% 27% 11.85% *Table IV of the interim order specifies the list of 44 persons alleged as related party and suspected entities. Hereinafter referred to as Table IV entities. k) That shares sold by Sh. Mukesh Mittal were purchased by different persons through different stock brokers through online trading platform of Bombay Stock Exchange at different point of time; l) That consideration for aforesaid share trade was received by Sh. Mukesh Mittal through proper banking channel as per SEBI and BSE norms; m) That shares were not immediately purchased by the buyers on placement of sale order by Sh. Mukesh Mittal. Rather there was considerable amount of time gap in placement of sales order and purchase of shares by the buyer. Therefore, sale....
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....f the assessee. 2.5 Aggrieved, the assessee approached the Ld. First Appellate Authority. The submissions of the assessee are reproduced in the appellate order in which the assessee reiterated the submissions made before the A.O. and filed details of purchase and sale of scrip of M/s Radford Global Ltd. to show that he had entered into genuine transaction which was supported by documentary evidences. It was further submitted that the interim order of the SEBI had been revoked and the assessee had been cleared from all the allegations. The Ld. CIT (A) was of the opinion that the evidences furnished by the assessee with respect to the long term capital gain of Rs. 5,76,90,819/- could not be accepted as genuine as it had been established by the Investigation Wing of the Department, after making detailed enquiries, that the brokers through whom the assessee had purchased shares were involved in business of providing accommodation entries and that the shares purchased by the assessee were in the nature of penny stock. The Ld. CIT (A), did not accept the contention of assessee and following the rule of preponderance of probability dismissed the appeal of assessee. It was observed t....
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.... speculation, generalized statements, theoretical assumptions and allegations and assertions, without there being any supporting evidence and is therefore not in accordance with law. 1.5 That learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the broker of the assessee M/s Vivek Financial focus Ltd. had neither denied and nor disputed the genuineness of transaction, the conclusion arrived in the order is highly whimsical, arbitrary, illogical and wholly untenable. 1.6 That the learned Commissioner of Income Tax (Appeals) while sustaining the above addition has arbitrarily and, mechanically rejected the explanation and evidence tendered by the appellant and made the addition and denied exemption by drawing subjective, premeditated and preconceived inferences therefore the same are not sustainable. 1.7 That various adverse findings and conclusions recorded by the learned Commissioner of Income Tax (Appeals) are factually incorrect and contrary to record, legally misconceived and untenable. 1.8 That the learned Commissioner of Income Tax (Appeals) has erred in concluding without any basis that assessee has introduced his....
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.... Share Capital 14,06,23,000 Reserves and Surplus 5,77,67,887 Tangible Assets 1,51,839 Inventories 9,17,40,364 Trade receivables 11,18,94,152 Cash and Cash equivalents 3,10,125 Revenue from operations 11,03,60,575 Other income 87,73,463 Profit before Tax 26,10,120 3.1 The learned AR submitted that in case of Shri Brij Bhushan Singhal vs. ACIT, the Tribunal considered an identical issue in scrip of the same company M/s Radford Global Ltd. In that case also, interim order of the SEBI was rejected and the appeal of assessee has been allowed. He submitted that the issue is covered in favour of the assessee by the aforesaid decision. I was further submitted that a similar view has also been expressed in the case of Sh. Riaz Munshi v. ACIT (supra). He also relied upon the following decisions in which such proposition has been held in favour of the assessee: i) Smt. KarunaGarg v. ITO ITA No. 1069/D/2019 dated 6.8.2018 A.Y. 2014-15 ii) Smt. SimmiVerma v. ITO ITA No. 3387/D/2018 dated 6.11.2018 A.Y. 2014-15 iii) Smt. Jyoti Gupta ITA No. 3510/D/2018 dated 6.11.2018 A.Y. 2014-15 4.0 The Ld. DR on the other h....
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.... Securities market) Regulations, 2003 (PFUTP Regulations) in respect of following 82 entities (against whom directions were issued vide the interim orders as confirmed vide the above said confirmatory orders) warranting continuation of action under section 11B r/w/ 11(4) of SEBI Act. However investigation has found adverse findings against Radford which warrants Adjudication proceedings". 5.1 The name of the assessee appears at item 77 of the list. Further it was held in Para 10 as under: "10 Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the script of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9,2015 which were confirmed vide orders dated October 12, 2015, March 18, 2016 and August 26, 2016 are liable to be revoked." 5.2 The decision of ITAT in the case of Shri Brij Bhushan Singhal vs. ACIT (supra), considered the scrip of M/s Radford Global Ltd. on identical facts and held as under: "30. Further, the assessing officer has heavily relied upon the various orders passed by ....
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....ee has filed financials of M/s EBFL from A.Ys. 2011-2012 to 2017- 2018 and for the assessment year under appeal the financials are reproduced above, which clearly show that this Company is dealing in actual business activities. Its financials are very heavy and as such the modus operandi of this type of penny stock companies would not be available in the case of M/s EBFL. The findings of the A.O. are entirely based upon interim order of SEBI. However, it is an admitted fact that interim order of the SEBI have been later on revoked by the SEBI on assessee as well as M/s EBFL have been cleared from all allegations and charges. In the case of Amar NathGoenka vs. vs., ACIT reported in 54 CCH 344, the ITAT, Delhi Bench considered the scrips of M/s EBFL on identical facts and held as under: "Assessee placed sufficient documentary evidences before A.O. to prove genuineness of the transaction. The assessee purchased shares through banking channel and actually got the shares transferred in his name. Purchase was made through cheque which is supported by bank statement. The transactions of sale have been made through Demat account. The contract note along with other details were pro....
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.... Since the interim order of the SEBI have been revoked against the assessee and M/s EBFL, therefore, nothing survives in favour of the A.O. The A.O. did not make any further investigation or enquiry into the matter and merely relied upon the interim order of the SEBI and investigation carried out by the Kolkata Wing. Further, it is not clear from the assessment order whether Investigation Wing report have been confronted to the assessee or any right of cross-examination have been allowed to any statement recorded at the back of the assessee. The assessee asked for the cross-examination of any statement which is used against the assessee for making the addition. But, the assessment order is silent on this aspect. Therefore, the above facts clearly show that assessee entered into the genuine transaction and as such the profit on sale of scrip was exempt from tax. The Ld. D.R. relied upon decisions of the ITAT, Delhi Benches, Delhi in the cases of SumanPoddar vs., ITO (supra) and UditKalra vs., ITO (supra), in which the findings of the Tribunal had been that these are cases of penny stock companies which fact is not there in the present case. Therefore, these decisio....
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....Cubical Services 11.6.2014 13,61,908 8.3.2013 4,34,982 9,26,926 (Claimed exempt u/s 10(38) iv) 2017-18 PC Jewellers 20.2.2017 1,53,02,868 21.8.2013 33,56,119 1,19,46,749 (Claimed exempt u/s 10(38) PVR 20.2.2017 1,28,353 8.12.2007 22,725 105628 (Claimed exempt u/s 10(38) v) 2018-19 MotilalOswal 11.5.2017 4,93,675 27.4.2017 5,00,000 -6325 (Short term capital gain) vi) 2019-20 Oil & Natural Gas Corporation 21.2.2019 2,06,700 16.1.2019 1,93,011 13,689 Polka Resorts (P) Ltd. 23.3.2019 1,08,00,000 23.1.2017 22,95,082 85,04,918 MotilalOswal 7.9.2018 1,10,37,986 16.5.2017 98,00,000 12,37,986 5.5 It is also seen that the assessee has placed on record complete documents and evidences to support purchase and sale of shares of M/s Radford Global Ltd. The sale was through screen based trading and STT and all charges were duly paid. The consideration was received through banking channels. In such circumstances, the AO ought to have conducted independent enquiries and verifications with due application of mind before drawing any adverse inference. Thus, t....
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....iry and any information received from the Investigation Wing is required to be corroborated and reaffirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above clearly show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry. 24. The report from the Directorate Income Tax Investigation Wing, Kolkata is dated 27.04.2015 whereas the impugned sales transactions took place in the month of March, 2014. The exparte ad interim order of SEBI is dated 29.06.2015 wherein at page 34 under para 50 (a) M/s. Esteem Bio Organic Food Processing Ltd was restrained from accessing the securities market and buying selling and dealing in securities either directly or indirectly in any manner till further directions. A list of 239 persons is also mentioned in SEBI order which are at pages 34 to 42 of the order the names of the appellants do not find place in the said list. At pages 58 and 59 the names of pre IPO transferee in the scrip of M/s. Esteem B....
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....rt received and did not make the necessary further enquiries - such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO." 5.9 In yet another case of Odeon Builders (P) Ltd 110 Taxmann.com 64, the Hon'ble Supreme Court, while dismissing the review petition, held as under: "However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the Ld. CIT (A) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the ....
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.... Assessing Officer was not recorded by the Assessing Officer in the assessment proceedings but it was pre existing statement recorded by the INV Wing and the same cannot be the sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opinion, neither the Assessing Officer conducted any enquiry nor has brought any clinching evidence to disprove the evidences produced by the assessee. 24. Our above view is fortified by the decision of the Hon'ble Delhi High Court in the case of Fair Invest Ltd 357 ITR 146. The relevant findings of the Hon'ble Jurisdictional High Court of Delhi read as under: "6. This Court has considered the submissions of the parties. In this case the discussion by the CIT(Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the assessing officer chose to base himself merely on the genera....