TaxTMI 
TaxTMI 
2021 (6) TMI 613
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....er estimated addition on account of alleged commission expenses @ 5% against these transactions was also made which is also disputed under the appeal. 3. We have carefully heard the rival submissions and perused relevant material on record including documents as placed in the paper book. The judicial precedents as relied upon during the course of hearing have duly been deliberated upon. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. The Ld. AR relied on various favorable decisions of the Tribunal / Hon'ble High Courts rendered on similar factual matrix. On the other hand, Ld. DR submitted that the assessee obtained huge benefit on sale of shares without any plausible justification. Assessment Proceedings 4.1 The assessee being resident HUF was assessed u/s 143(3) on 27/12/2016. While framing the assessment, the assessee was denied exemption u/s 10(38) on certain Long-term capital gains (LTCG) earned on sale of shares of an entity namely M/s Moryo Industries Ltd. (MIL). The said gains were ultimately added to the assessee's income as unexplained cash credit u/s 68 of the Act. The assessee has also been saddled with addition u....
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....(LTCG) / Short-Term Capital Losses (STCL) were admitted. In the above background, the gains earned by the assessee were alleged to be pre-arranged in connivance with the operators of the scrip. 4.5 It transpired that the assessee was allotted shares at face value of Rs. 25/- per share. Thereafter, the shares were sub-divided into two. The shares were ultimately sold at an average rate of Rs. 203/- per share (approx.) to various buyers (15 in number) as tabulated in para 6.2 of the order. Notices issued u/s 133(6) to all the buyers did not elicit any satisfactory response. 4.6 It was noted by Ld.AO that there was sharp rise in the price of the scrip since its allotment. Upon analysis of financials of M/s MIL, it was observed that its net worth was negligible and it was alleged that the share prices were artificially rigged by operators to accommodate desirous beneficiaries. 4.7 During survey u/s 133A by investigation wing on one Shri Pravin Agarwal, director of a stock-broking entity namely M/s Gateway Financial Services Ltd., he admitted to have helped various persons to obtain accommodation entries in various scrips including the scrip of M/s MIL. Similar statement was....
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....ciary of such price rigging scam. Further, the shareholding pattern of M/s MIL, as obtained from stock exchanges, would show that there were number of non-promoters shareholders in the said entity. The price of the scrip would be totally dependent upon market perception and sentiment in which the assessee would have no role to play. The assessee also assailed the invocation of Sec.68 on these transactions. In support, reliance was placed on various judicial pronouncements. 4.10 However, not convinced with assessee's explanations, the sale proceeds as received by the assessee was treated as unexplained cash credit u/s 68. The commission against these transactions was estimated @5% while framing the assessment. Appellate Proceedings 5. Though the assessee reiterated its submissions before Ld. CIT(A), however, going by the findings of Ld. AO, it was held that revenue could not accept such make-believe transactions. Truth of genuineness of such transactions must prevail over the smoke-screen created by way of pre-meditated series of steps taken by the assessee with a view to impart color of genuineness and character of commercial nature to such transactions. One has to look....
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....ctions and discharged the primary onus as required under law to establish the genuineness of the gains so earned during the year. No defect has been pointed out by the revenue in documentary evidences furnished by the assessee. Therefore, the onus had, thus, shifted on revenue to disprove assessee's claim and establish with cogent evidences that the transactions were non-genuine transactions through which assessee's unaccounted money has flown back to assessee in the garb of bogus capital gains. However, we find that except for general findings of investigation wing and third-party statements on the basis of which it has been alleged that the scrip of M/s MIL was penny stock, there is nothing in the kitty of the revenue to prove the assessee's involvement in manipulating the prices of the scrip. No exchange of cash between the assessee and the various exit providers could be proved. Therefore, the onus as casted upon revenue to dislodge the assessee's claim could not be discharged. 7.3 So far as the observations of Ld. AO as to financial and profitability of MIL is concerned, we find that the sales transactions have taken place in online mechanism through recognized stock exc....
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....he addition thus made purely on the basis of third-party statement recorded at the back of the assessee could not be sustained in the eyes of law unless the same are confronted to the assessee and the same are backed by any corroborative material. No effective investigation is shown to have been carried out by Ld. AO to dislodge the assessee's claim by bringing on record cogent evidences as well as confronting the same. We find that except for general allegations as narrated in the investigation wing report, there is no evidence which would link assessee's involvement in jacking up the prices of the shares with a view to earn artificial gains. The additions so made could not be sustained in the eyes of law as per the decision of Hon'ble Apex Court in Kishanchand Chellaram V/s CIT (125 ITR 713) and also in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006 dated 02/09/2015) wherein it has been held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity in as much as it amounts to violation of principal of na....
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....e through registered stock broker. The sale transactions have taken place through recognized stock exchange and the money was received in settlement through banking channels. The assessee had delivered the shares from his demat account to the broker, who, in turn, paid sale consideration to the assessee. In such a case, there could be no doubt as to fulfillment of primary ingredients of Sec.68 viz. identity of the payer, their creditworthiness and the genuineness of the transactions. The source of credit received in the bank account could not be held to be unexplained unless it was established that assessee's own money was routed in his bank account in the garb of Capital gains. 7.8 The various case laws as cited by Ld. AR also support our view, some of which could be tabulated as under: - (i) Hon'ble Bombay High Court in CIT V/s Mukesh Ratilal Marolia (ITA No.456 of 2007; 07/09/2011) (ii) Hon'ble Gujarat High Court in CIT V/s Maheshchandra G.Vakil (40 Taxmann.com 326; 25/09/2012) (iii) Hon'ble Rajasthan High Court in CIT V/s Smt. Sumitra Devi (49 Taxmann.com 37; 24/02/2014) (iv) Hon'ble Rajasthan High Court in CIT V/s Pooja Agarwal (ITA No.38....