TaxTMI 
TaxTMI 
2021 (6) TMI 925
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....red in upholding the action of the Assessing Officer disallowing Long Term Capital Gain on sale of shares of Rs. 36,14,053/- claimed exempt u/s 10(38) of the Act, 1961 and brokerage @ 2% of Rs. 72,281/- for earning the said gain thus totaling Rs. 36,86,334/- and treating it as income from undisclosed sources. That on the facts and in the circumstances of the case, the Long Term Capital Gain of Rs. 36,14,053/- was rightly claimed as exempt u/s 10(38) be accepted as such and the alleged brokerage @ 2% of Rs. 72,281/- spent to earn such gain he deleted and the order of the Ld. CIT(A) may very kindly be quashed. 2. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/ or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises. " (ii) Grounds of appeal in ITA No.703/Ind/2018 - Smt. Vijaya Nyati 1."That the Ld. CIT(A) erred in upholding the action of the Assessing Officer disallowing Long Term Capital Gain on sale of shares of Rs. 33,98,3871- claimed exempt u/s 10(38) of the Act, 1961 and treating it as income from undisclosed sources. That on the facts and in the circumstances of the cas....
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....ourse of survey proceedings u/s 133A in the case of M/s Shipra Fabrics Pvt. Ltd., Mumbai. (b)using the statement of Shri Vipul Vidur Bhatt and not providing an opportunity of cross examination to the assessee which is against the principles of natural justice. (c) completely ignoring the well- established position of law that no addition can be made solely on the basis of statements recorded on oath during the course of survey proceedings u/s 133A having no evidentiary value. (d)simply on the basis of information received from A.D.I.T.(Inv), Mumbai, without making own independent enquiry and efforts. 3. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/ or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises. " (iv) Grounds of appeal in ITA No.705/Ind/2018 - Shri Manish Kumar Radheshyam Nyati, HUF 1."That the Ld. CIT(A) erred in upholding the action of the Assessing Officer disallowing Long Term Capital Gain on sale of shares of Rs. 33,25,952/- claimed exempt u/s 10(38) of the Act, 1961 and treating it as income from undisclosed sources. That on the ....
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....Ayushi Nyati and the same are as follows:- (i) Issue of genuineness of claim of exempt income u/s 10(38) of the Act from Long Term Capital Gain ( In short 'LTCG) arising from sale of equity shares of M/s Sunrise Asian Limited listed on recognized stock exchange and the amount impugned before us are as under:- S.No. Name Long Term Capital Gain 1 Ms. Ayushi Nyati Rs. 36,14,053/- 2 Smt. Vijaya Nyati Rs. 33,98,387/- 3 Shri Vijay Kumar Radheshyam Nyati HUF Rs. 35,01,004/- 4 Shri Manish Kumar Radheshyam Nyati HUF Rs. 33,25,952/- 5 Smt. Mamta Nyati Rs. 35,99,598/- (ii) Addition for brokerage expenses of Rs. 72,281/- deemed to have been incurred by Miss Ayushi Nyati for arranging accommodation entry of LTCG. 4. Since most of the issues are common and as agreed by all the parties we will take up the facts of Miss Ayushi Nyati for the purpose of adjudication. 5. Brief facts of the case are that return of income for Assessment Year 2014-15 was e-filed on 29.7.2014 declaring income of Rs. 4,10,680/-. Case selected for scrutiny through CASS followed by serving of statutory notices u/s 143(2) and 142(1) of the Act. In ....
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....re the Tribunal. 9. Ld. Counsel for the assessee vehemently argued referring to the written submissions placed on record which are reproduced below:- Chronology of the Transaction: 1. The common issue involved is Long term capital gain on sale of shares claimed exempt u/s 10(38) alleged as penny stocks. 2. Purchase of 7500 shares @ Rs. 20/- each of Conart Traders Ltd. was made by cheque from Santoshima Lease Finance & Investment (India) Ltd. on 17.09.2011 for Rs. 1,50,000/- in physical form through an off-market transaction. 3. The shares of Conart Traders Ltd. were duly dematerialized. 4. Name of Santoshima Lease Finance & Investment (India) Ltd. was changed to Santoshima Tradelinks Ltd. on 16.09.2011. 5. Amalagamation of Conart Traders Ltd and Santoshima Tradelinks Ltd. with Sunrise Asian Ltd. took place on 11.10.2012 by order of Mumbai High Court. 6. Assessee received 7500 shares of Sunrise Asian Ltd. in lieu of shares of Conart Traders Ltd. post amalgamation on 26.06.2013 received in demat account on 28.06.2013. 7. Sale of 7500 shares of Sunrise Asian Ltd. was made on different dates through an authorize....
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....change i.e. 17.09.2011 whereas the name of M/s Santoshima Lease Finance & Investment (India) Ltd. was changed to M/s Santoshima Tradelinks Ltd. just a day before and hence the assessee was unaware of the developments. The change of name in the bank account also takes some time as there is a process involved in the change of name. c) The purchase was made via an off-market transaction and payment was routed through Dena Bank. The share certificate allotting shares bears the date of last week of November 2011, the reason being that the change of name and other formalities were taking place and since the allotment was made in physical form some time gap is inevitable. d) The share certificate carries only the endorsement not the transfer of shares. The endorsed share certificate was received in second week of December, 2011. The shares were dematerialized subsequently in the next year i.e. 2012. e) The rubber stamp analogy is baseless as M/s Santoshima Tradelinks Ltd. was a substantial shareholder of Conart Traders Ltd. and hence a rubber stamp must have been prepared to save time as the share certificates were issued manually. The endorsement of shares in t....
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.... the assessee nor the broker have been implicated in the SEBI investigation. j) The AO has observed that the case was selected for scrutiny on the basis of inputs provided by the Investigation wing. So, there is no application of mind but merely a borrowed satisfaction on the basis of which the assessment has been framed. k) The AO has done no independent investigation at his end. Neither any summons u/s 131 nor any notices u/s 133(6) were issued to any of the entities involved to confirm the veracity of transactions. Instead he chose to make the addition simply on the basis of suspicion which howsoever strong it may be cannot replace evidence. The Ld. CIT(A) on the other hand has relied on the investigation carried out by DIT (Investigation), Kolkatta and discussed the alleged modus operandi of the operators, pan India, to rig share prices and generate Long Term Capital Gain which is exempt from tax. No opportunity was given by the Ld. CIT(A) to counter the same. The Ld. CIT(A) has also quoted admission made by various entities like M.P. Stock Exchange, Indore, Destiny Securities Ltd. New Delhi that Sunrise Asian was one of the penny stocks thro....
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....ds and shares. The Revenue from operations of Sunrise Asian Ltd as on 31.03.2013 and 31.03.2014 was Rs. 73,83,56,861 and Rs. 113,45,80,505 respectively which by no means was meager. The Profit after Tax of Sunrise Asian Ltd as on 31.03.2013 and 31.03.2014 was Rs. 27,58,163 and Rs. 69,54,857 respectively which by no means was meager. The Reserves & Surplus of the company stood at Rs. 32.21 crores and Rs. 32.61 crores as on 31.03.2013 and 31.03.2014 respectively. Even the EPS as on 31.03.2013 stood at 0.65. ix) The conclusions drawn are not based on facts but on reports of Investigation Wing or statements recorded behind the back of the assessee without affording an opportunity of being heard. The most important part in the Ld. CIT(A) order is his quoting of the statement of Shri Vipul Vidur Bhatt recorded on 04.02.2016 by ADIT (Inv), Unit 4(3), Mumbai during the course of survey u/s 133A in the case of Shipra Fabrics Pvt. Ltd. Mumbai wherein Shri Vipul Vidur Bhatt categorically accepted that he has rigged the price of shares of M/s Sunrise Asian Ltd. Reference to Q. 20 has been made. Your Honour's kind attention is drawn to the decision of the Hon'ble ITAT....
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.... Court, Nagpur Bench in the case of Sanjay Bimalchand Jain vs. Pr. CIT (2018) The facts in the case of Sanjay Bimalchand Jain are different and distinguishable mainly because :- (i) in that case, the broker through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the purchaser of the shares sold by the assessee (ii) At the time of acquisition of shares of both companies by the assessee, the payments were made in cash (iii) The address of both the companies were same (iv) The authorized signatory of both the companies were also the same (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was same as the address of the two companies. None of these factors are present in the present case before your Honour. Hence it can be concluded that the decision of Hon'ble Bombay High Court is factually distinguishable. In the case before your Honour the Ld. CIT(A) who has coterminous powers as that of the Assessing Officer made no efforts to conduct independent enquiries but chose to rely on ....
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....submission made before Ld. CIT(A)) which becomes a nullity in view of the Hon'ble Supreme Court decision in the case of Andaman Timber Industries, 281 CTR 0241 (SC) 15. The Investigation proceedings were not complete but by that time AO reached a conclusion that the assessee was a beneficiary involved in malpractices and a part of the scam where prices were rigged to gain long term capital gains. In fact the report of the Investigation Wing should have been a starting point for the AO to proceed with further investigation but he instead of doing so took it as a finality. 16. SEBI could not complete any investigation against shares of Sunrise Asian Ltd. as the same stood abated as the persons to whom notices were issued viz. Shri Ramesh Kataria and Smt. Sarojini Kataria had expired. Copy of the SEBI order is enclosed at pages 05 to 08. 17. So far as the suspension of trading on BSE of Sunrise Asian Ltd. is concerned it was not due to some circuit trading or rigging / price manipulation but non- compliance of listing regulations and failure to pay the mandatory fines for much non-compliance. A copy of clipping of The Economic Times dated 17.11.2016....
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....168 - 188 10. VAISHAL SURYAKANT SHAH Vs. ITO (AHMEDABAD TRIBUNAL) - (2017) - 49 CCH 0106 - (Pages 189 - 195 of Case Laws Paper Book) 11. Andaman Timber Industries vs. Commissioner of Central Exciese (Hon'ble Supreme Court) -2015 94 CCH 0187 12. ITO vs. Mayuresh Logistics Pvt. Ltd. (Mumbai Tribunal)-2019 ITANO.6691 13. SMT. APARNA MISRA Vs. ITO-23(4) (KOLKATTA) TRIBUNAL) I.T.A. No. 161/Kol/2019 Assessment Year: 2015-16 (2021) (Pages 217 - 226 of Case Laws Paper Book) 14. ACHAL GUPTA Vs. ITO (LUCKNOW TRIBUNAL) - (2021) (Pages 227 - 242 of Case Laws Paper Book 15. Pr CIT-12, Delhi Vs. Smt. Krishna Devi & Others (DELHI HIGH COURT) - (2021) (Pages 243 - 252 of Case Laws Paper Book) 16. Anraj Hiralal Shah (HUF) Vs. ITO, 19(1), Mumbai ITAT Mumbai 'SMC' (2021) (Pages 253 - 256 of Case Laws Paper Book) 17. Dipesh Ramesh Vardhan Vs. DCIT- Central Circle -2(2), Mumbai (ITAT Mumbai "D" Bench) - (2020) (Pages 257 - 276 of Case Laws Paper Book) 18. Ashok Agrawal & Others V/s ACIT, Jaipur, I.T.A.T. ITA No.124/JP/20 & others dated 18.11.2020. 10. Ld. Counsel for the assessee also submitted that the case of the ....
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....ators minutely, has found that the assessee is one of the beneficiaries of availing the accommodation entries of bogus Long Term Capital Gain. There is a stiff rise in the price of the shares at the time of sale as against the acquisition cost which clearly shows that the transaction is not genuine but it is a bogus transaction of accommodation entries of Long Term Capital Gain. The Ld. D/R has submitted that the transaction through banking channel and sale of shares on the stock exchange is not sacrosanct to hold that the transaction is genuine when all other surrounding circumstances indicate that the assessee has obtained accommodation entries of bogus Capital Gain in respect of penny stock and the circumstantial evidence and surrounding circumstances cannot thus be ignored. Thus the Ld. AO has clearly brought out the case of accommodation entries of bogus Long Term Capital Gain and which has been rightly confirmed by the Id CIT(A). The Id. D/R has relied upon the decision of Hon'ble Delhi High Court in case of Suman Poddar vs. ITO, 112 taxmann.com 329 (Delhi). The Id. D/R has submitted that the Hon'ble High Court has confirmed the decision of the Tribunal whereby the Lo....
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....ly merged to "M/s Sunrise Asian Limited" by the order of Hon'ble Bombay High Court and assessee received the converted equity shares of "M/s Sunrise Asian Limited" in their Demat account. Thereafter during the year under appeal the shares were sold through recognized stock exchange at the price appearing on the portal of the exchange. The shares were transferred from Demat account and consideration was received. All the evidences in support of above stated transactions have been filed before the lower authorities and their genuineness are not in doubt. The main contention of the revenue authorities is that M/s Sunrise Asian Limited is not a company of worth looking to the price of equity shares appearing at the stock exchange portal and was manipulated by the brokers and others by increasing the share price abnormally and then provide bogus Long Term Capital Gain entries. 15. Before us Ld. Counsel for the assessee has referred to various judgments of which few was squarely applicable on the facts and issues placed before us. There are so much similar that they also pertains to issue of Long Term Capital Gain from sale of equity shares of M/s Sunrise Asian Limited. Co-ordinate B....
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....11 Issue of proposal for private placement of shares of the company at a premium of Rs. 10/- per shares alongwith copy of list of directors and copy of financial report for Financial Year 2007-08, Financial Year 2008-09 & Financial Year 2009-10 20 July 2021 Letter issued to the company for further clarifications and requiring copies of Memorandum of Association, Articles of Association and Balance Sheet for the Financial Year 2010-11. 28 July 2011 Reply received from the company alongwith the documents desired. 19 September 2011 Applied for 30000 equity shares of the company by paying an amount of Rs. 6,00,000/- October 2011 Received shares certificate in respect of shares allotted. July 2012 Received Balance Sheet of the Santoshima Tradelinks Limited (name of company changed w.e.f. 16.09.11) for the FINANCIAL YEAR 2011-12 October, 2012 Received Notice for court convened meeting of Equity Shares Holders for amalgamation of company and another company Conart Traders Limited with Sunrise Asian Limited. 19 October 2012 Placed request for getting the shares in dematerialized form. 22 October 2012 Letter issued to Mr Nilesh P Chouhan, D....
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.... and unprecedented and beyond human probability and thus it was concluded that the transaction is sham transaction and the M/s Sunrise Asian Limited is a penny stock company. 18. Further in view of the claim of the Ld. Counsel for the assessee that the issue raised before us is squarely covered by the decision of Coordinate Benches, we have gone through the facts involved in the case of Dipesh Ramesh Vardhan V/s DCIT (supra) and find that the Co-ordinate Bench of Mumbai has thoroughly examined the similar set of facts and the same issue as raised before us including the claim of exempt income of Long Term Capital Gain from sale of equity shares of SAL u/s 10(38) of the Act and the revenue contending it to be a sham and bogus transaction liable to be taxed u/s 68 of the Act as unexplained cash credit and estimated brokerage expense for arranging LTCG. After thoroughly discussing the facts and issues, Co-ordinate Bench, Mumbai has decided in favour of the assessee and held that the claim of Long Term Capital Gain u/s 10(38) of the Act from the sale of equity shares of M/s Sunrise Asian Limited is genuine and SAL is not a penny stock company and further holding that the alleg....
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....position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs. 360/- to Rs. 600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. 7. As against the assessee's position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associated entities including M/s SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all a....
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....tities and secondly, the onus casted upon assessee to prove the genuineness of the transactions was already discharged by the assessee. Shri Vipul Bhat, in his statement, stated that one Shri Sandeep Maroo acted as intermediary who introduced Vardhan family to him. However, no further investigations have been carried out to establish this vital link between the assessee and Shri Vipul Bhat. We do not find any independent investigations by Ld. AO to bring on record any tangible material to corroborate the same. There are no evident or even allegation of any cash exchange between the assessee and group entities of Shri Vipul Bhat. This is further evidenced by the fact that no substantial incriminating material / wealth of that magnitude has been found during the course of search operations on assessee which would corroborate such presumption and prove that the transactions were sham transactions, in any manner. 9. The fact that the assessee could not produce the concerned person of M/s SAL was rightly controverted by submitting that the aforesaid entity was not under the control of the assessee and the assessee was under no obligation to do so. The existence of M/s SAL is be....
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.... of 2012 dated 27/01/2014 which is reported as 88 CCH 0027 SCC. The SMC Bench of Tribunal in Anraj Hiralal Shah (HUF) V/s ITO (ITA No. 4514/Mum/2018 dated 16/07/2019) held that in the absence of any evidence to implicate the assessee or to prove that the transactions were bogus, the Long-Term Capital Gains declared by the assessee could not be doubted with. This case was dealing with gains earned by the assessee on sale of same scrip i.e. M/s Sunrise Asian Ltd. 13. Therefore, considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld.CIT(A) in sustaining the impugned additions in the hands of the assessee. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed. 19. Subsequently Co-ordinate Bench of Jaipur in the case of Ashok Agrawal V/s ACIT in ITA No.124/JP/2020 dated 18.11.2020 has followed the decision of Hon'ble Mumbai Tribunal in the case of Dipesh Ramesh Vardhan (supra) qwhile dealing with the same issue of Long Term Capital Gain from sale of equity shares of M/s Sunrise ....
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....ngth. And referring to legal proposition laid down by the Hon'ble Supreme Court that the burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidence held that 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. We are in complete agreement with the said view and in the instant case, we find that evidence produced by the assessee in support of his claim of purchase and sale of shares on the stock exchange have not been refuted by any adverse findings or material which could demonstrate involvement of the assessee or collusion with so called accommodation entry providers to obtain bogus LTCG as so alleged by the authorities below. 24. We also find that while analyzing sale of shares of similar scrip of M/s Sunrise Asian Ltd and claim of exemption of long term capital gains u/s 10(38), the Mumbai Benches of the Tribunal in case of Anraj Hiralal Shah (HUF) vs ITO (supra) has upheld the claim of....
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....Departmental Representative has relied on two judgments, the one of Hon High Court of Gauhati in the case of CIT V/s Smt. Sanghamitra Bharali (2014) to taxmann.com 47 (Gauhati) (supra) is not applicable on the instant case since in this case the company address where shares were sold by the assessee has not been found by the Inspector of the Income Tax Department proving its non existence. This is not the fact in the instant case as neither any such enquiry has been conducted and secondly no dispute has been raised about the existence of the company. Therefore the judgment of Hon'ble Gauhati High Court is not applicable and thus distinguishable. 20. As regards the judgment of Hon'ble Supreme Court in the case of Suman Poddar V/s ITO (supra) delivered on 22.11.2019, we find that Hon'ble High Court of Delhi in its recent judgment dated 15.1.2021 in the case of PCIT V/s Krishna Devi & Others ITA No.125/2020 dealing with the similar issue of claim of exemption u/s 10(38) of the Act for Long Term Capital Gain from sale of equity shares has duly considered the judgment of Hon'ble Supreme Court in the case of Suman Poddar V/s ITO (supra) and has confirmed the order of the Tribuna....
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....ed from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, ....
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....ti Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed. 21. We therefore are of the considered view that the facts involved and issues raised in the instant appeal are squarely covered by the decision of Co-ordinate Bench of Mumbai and Jaipur in the case of Dinesh Ramesh Vardhan V/s DCIT and Ashok Agrawal V/s ACIT respectively and further find support from the judgment of Hon'ble Delhi High Court in the case of PCIT V/s Krishna Devi & Others and thus hold that the alleged transaction of earning Long Term Capital Gain from sale of equity shares of M/s Sunrise Asian Limited....