TaxTMI 
TaxTMI 
2021 (5) TMI 217
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.... the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the assessing officer in disallowing the exemption of Rs. 1,66,406/- claimed by assessee u/s. 10(2A) on account of share of profit of firm and treating it as the income of assessee. 3. It is therefore prayed that the above addition made by the assessing officer may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. Brief facts of the case are that the assessee is an individual, during the relevant financial year 2001-12, the assessee was allegedly engaged in the business of brokerage of land. The assessee filed its return of income for relevant assessment year 2012-13on 31.03.2013 declaring income of Rs. 65,60,220/-. In the computation of income, the assessee has shown 'income from house property' and 'other sources'. The return of income was selected for scrutiny. During the assessment, on verification of return of income, the assessing officer (AO) noted that assessee has claimed exempt income of Rs. 8,67,79,658/-, which consist of Long Term Capital Gain (LTCG) from share transactions on which se....
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.... as on 20.01.2012 and Rs. 9,72,81,212/- in respect of Nimbus Industries and Regency Trust. The contract notice of Nirmal Bang Securities Pvt. Ltd., also does not reflect the sale of listed securities of the aforesaid amount. The Assessing Officer took his view that in absence of any documentary evidence showing exempt LTCG, the assessee failed to prove that capital gain is exempted as per section 10(38) of the Act. Therefore, the Assessing Officer made addition of Rs. 8.67 crore, which includes the income from Firm/AOP (Desai Gas Agency). Aggrieved by the additions/ disallowances in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee furnished detailed written submission as recorded by the ld.CIT(A) in para 6 onward. In the written submissions the assessee stated that the assessee furnished all the details to the assessing officer with regards to LTCG, which consist of books of accounts of assessee as on 31.03.2012 showing the credits of sale considerations of shares of Nimbus Industries and Regency Trust Ltd. complete details of purchase and sales of these shares were provided to the assessing officer. It was also stated that ....
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....x (STT) was paid on the transactions, transactions were made through stock exchange, payments were made through banking channels, which has been confirmed by the assessing officer. The assessing officer has accepted the transaction of both the scrips. No adverse findings on the evidences furnished by the assessee were given by the assessing officer. It was also stated that the assessing officer has given different report to mislead. The assessee is investor and in case the broker was indulging in malpractice of some other transaction, the investor's investment cannot be treated as non-genuine. The assessee also relied on certain case laws. 9. The ld.CIT(A) after considering the remand report of Assessing Officer and the objection/rejoinder filed by the assessee confirmed the addition by taking view that although the basis for making the addition did not survive, but there is a probability that allotment of share and their eventual sale is a preplanned to scheme to convert unaccounted income into exempt income. Further aggrieved, the assessee has filed present appeal before this Tribunal. 10. We have heard the submission of ld. authorised representative (AR) of the assessee and ....
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....involved in price rigging or manipulation in case of both the scrip's. No iota of the evidence was brought on record by lower authorities to prove that the fundamentals of any of the companies in which assessee transacted were weak. It is submitted that both the companies are listed companies even at present and they are marked as active as per the latest Ministry of Corporate Affairs (MCA) master data. 13. The ld. AR for the assessee further submits that it is to be noted that the additions in this case is not based on investigation report of either income tax department or other authority or on the statement of entry provider. Further as submitted above SEBI has not taken any action against alleged two companies or their directors or concern brokers for any manipulation of prices prevailing in the stock exchange. The reliance is placed on following decision of Hon'ble Gujarat High Court: * CIT Vs Mahesh Chandra G. Vakil [220 Taxman 166 (Gujarat HC)] * CIT Vs Himani M. Vakil [10 taxmann.com 326 (Guj HC)] * PCIT Vs Ramnivas Ramjivan Kasat [82 taxmann.com 458 (Gujarat HC)] * PCIT Vs Dhwani M. Shah [Tax Appeal No. 674 of 2017 ] (Gujarat HC ) 14. The ld AR for the assessee....
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....ade on the sales of scrips of Regency Trust Ltd. 16. The ld AR for the assessee further made reliance on the other decisions of the various High Courts where the addition on account of capital gain derived in case of penny stock scrips was not sustained: * M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) * CIT Vs. Lakshmangarh Estate & Trading Co. Limited [40 taxmann.com 439 (Cal HC)] * CIT Vs. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) * CIT Vs. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) * CIT Vs. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) * CIT Vs. Bhagwati Prasad Agarwal [ITA No. 22 of 2009 (Cal HC) ] * CIT vs. Shyam R. Pawar [229 Taxman 256 (Bom HC)] * CIT vs. Smt Jamna Dev Agarwal [328 ITR 656 (Bom HC)] * Pr. CIT vs. Prem Pal Gandhi [ITA No. 95 of 2017 (P & J HC) * CIT vs. Vivek Mehta [204 Taxmann 177 (P & J HC)] * PCIT Vs. Hitesh Gandhi [ITA No. 18 of 2017 (P&J HC)] * CIT vs. Smt. Sumitra Devi [49 taxmann.com 37 (Raj HC)] * CIT vs. Mukesh R Maroliya [80 CCH 0407 (Mum HC)] * CIT vs Udit Narain Agrawal [(2013) 31 taxmann.com 76 (All)] * CIT, Jamshedpur Versus Arun Kumar Agarwal [Tax....
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....8. Ledger of Long term capital gain --- 140 29. Ledger account of Regency Trust Ltd for the period of 01.04.2011 to 31.03.2012 --- 141 30. Ledger account of Nimbus Industries Ltd for the period of 01.04.2011 to 31.03.2012 --- 142 31. Ledger account of Nirmal Bang Securities Pvt. Ltd for the period of 01.04.2011 to 31.03.2012 --- 143-145 32. Ledger account of assessee in the books of broker Nirmal Bang Securities Pvt. Ltd. --- 146-147 33. Date-wise, Contract-wise and Scriptwise Calculation of Long term capital gain --- 148 34. Contract notes of broker Nirmal Bang Securities Pvt. Ltd. --- 149-212 35. Demat Account with Nirmal Bang Securities Ltd for the period of 01.04.2011 to 31.03.2012 --- 213-216 36. Balance Sheet of the assessee as on 31.03.2011 --- 217-219 37. Ledger of Regency Trust Ltd for the period of 01.04.2010 to 31.03.2011 --- 220 38. Ledger account of Nimbus Industries Ltd for the period of 01.04.2010 to 31.03.2011 --- 221 39. Share Certificate regarding purchase of shares Regency Trust Ltd. 19.01.2010 222-234 40. Share application form regarding purchase of shares Regency Trust Ltd. 01.01.2010 235-238 41. Memorandum o....
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....6,31,212/- from the sale of scrips Regency Trust Ltd. out of the total capital gain of Rs. 8,66,13,252/-. On the decision of Delhi High Court in Suman Poddar Vs ITO (supra), the ld. AR for the assessee submits that in said case the assessing officer had brought on record that the fundamentals of the Cressanda Solutions Ltd. was not proper so as to increase in share price by fifty times over a short period of five months. In said case employee pensions scheme (EPS) was just 0.01 in March 2016 which was in negative in March 2015 & March 2014. Further, it was found in that case that no evidence of actual sale except for contract notes issued by broker were produced by the assessee. Further, in that case the addition was also based on the statement of entry provider and investigation report. The ld. AR made reliance on the latest decision of Delhi High Court in case of PCIT Vs Krishnadevi in ITA No. 125/2020 dated 15.01.2021 where it was held that "Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal Vs CIT (supra) is of no assistance. 20. We have considered the rival submissions of the parties and have gone through the orders of the authorities belo....
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....ssessee are matching with the data furnished by the Stock Exchange. 22. We have further seen that the assessing officer further vide his another report furnished vide letter dated 28.02.2018 to ld.CIT(A), stated that Bharat Bachubhai Merchant, Director of Nimbus Industries Ltd., was banned from trading by Security and Exchange Board of India (SEBI) vide its order dated 30.09.2012 for market manipulation during the Initial Public Offering (IPO) of P. G. Electroplast Ltd. The Assessing Officer also stated that M. R. Shah, Director of Regency Trust Ltd was also banned from trading by SEBI vide order dated 14.08.2014 for market manipulation through artificial increasing the sale price and concluded that both companies [share of which were traded by assessee] were not having potential, so that assessee could earn enormous capital gain. On the basis of the second report of the assessing officer the ld. CIT(A) held that although the basis for making the addition did not survive, but there is a probability that allotment of share and their eventual sale is a pre-planned to scheme to convert unaccounted income into exempt income. The conclusion drawn by ld CIT(A) is based on mare presumpti....
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....n in the present case as in case of Suman Poddar (supra). 26. Hence, the ground No. 1 of the appeal is allowed. 27. In the result ground No. 1 of the appeal is allowed. 28. Ground No. 2 relates to disallowance of Rs. 1,66,406 claimed as exempted under section 10(38). The ld. AR for the assessee submits that the assessing officer has not allowed the exemption under section 10(2A) in respect of share of profit from the Firm namely 'Desai Gas Agency', in which the assessee is one of the partner. The assessee received income of Rs. 2,56,485/- as remuneration, Rs. 3,90,852/- as interest and Rs. 1,66,406/- as share of profit from firm. Out of this, the amount of share of profit of Rs. 1,66,406/- is allowable as exemption under section 10(2A). The assessing officer clubbed this exempt income with the LTCG. The ld CIT(A) also not appreciated the facts and confirmed the action of the assessing officer. Before the lower authorities the assessee filed the details of Firms, consisting the details of partners their PAN, copy of return of income of Firm with computation of income. The lower authorities even not bothered to see the documents and the nature of exempt income. The ld. AR for the ....