TaxTMI 
TaxTMI 
2021 (7) TMI 493
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....the sake of convenience. 2. ITA No.7/Ind/2019 is taken as the lead case. The brief facts relating to the case is this that the assessee has filed his return of income declaring total income at Rs. 18,22,130/- on 30.9.2014 showing it income from Salary, House property, Business and income from share trading. The assessed claimed exemption u/s 10(38) of the Act of Rs. 20,46,018/- for Long Term Capital Gain derived from sale of listed company's share namely M/s Turbo Tech Engineering Ltd not chargeable to tax. The assessee has purchased 5000 shares of M/s Turbo Tech Engineering Pvt Ltd through stock broker M/s Shah Space Manager Pvt. Ltd, Vadodara (Gujarat). After the purchase of shares the same was dematted. The sale of shares were affected in the stock exchange through registered share broker after deducting expenses of Brokerage, STT and transaction charges on 23.05.2013 at Rs. 23,14,492.40. Such shares were purchased on 22.11.2011 and sold on 23.05.2013 upon holding the same for a period more than 12 months and on that basis the assessee claimed deduction u/s 10(38) of the Act under Long Term Capital Gain. Ultimately the Ld. A.O came to a conclusion that the transaction was ....
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....tablish live link between cash deposited by the assessee in form of long term capital gain. 4. The Revenue's allegation that investigation was carried out by various authorities and SEBI and that it was concluded that prices of the scrip has been whooping due to insider trading does not apply to the assessee. Even if the company indulge itself into money laundering and other illegal activities, the assessee cannot be held responsible for the hike in share price. The amount of capital acquired by assessee is too less in relation to overall share capital of the company M/s Turbo tech Engineering Ltd, also appellant has no right or control over the operations as also contended by the Ld. AR. 5. As regards the allegation in respect of artificial rigging up of the price of shares, it was submitted that the Id. A.O. did not provide any documentary evidence of a live link and direct relation to such alleged rigging of prices with the appellant. Hence, no adverse inference could be drawn against the appellant in this regard. 6. The long term capital gain on sale of shares is in compliance with law in all respect and is also eligible for exemption u/s 10(38), the assessee has genui....
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.... capital gain with the help of many alleged connected parties through price rigging and price manipulations does not arise. 11. It was further submitted by the Ld. AR that the addition in respect of 3% of total transaction of Rs. 23,25,000/- amounting to Rs. 69,750/- as undisclosed commission income" u/s 68 of the Income tax Act is totally baseless and without any evidence. It is purely based in the Ld AO's assumption. 12. In this regard the Ld. AR relied upon the judgment passed by Hon'ble ITAT Pune Bench passed in the matter of Smt. Smita P. Patil [2015)55 taxman.com 346 (Pune -Trib.). 13. In support of the case made out by the assessee the Ld. AR relied upon the following judgments :- (i) ITAT Delhi Bench in the case of Swati Luthra (2020) 115 taxmann.com 167 (Delhi Trib.) (ii) ITAT Indore Bench in the case of Arzoo Anand (2017) 3 ITJ Online 181 (Trib. - Indore) (iii) Delhi High Court in the case of Smt. Krishna Devi ITA 125/220 (iv) ITAT Delhi Bench in the case of Meenu Goel [2018] 94 taxmann.com 158 14. The Ld. DR raised objection of the cash purchase of shares and that the shares were dematted subsequent to such purchase. ....
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.... on 31.07.2014 declaring total income of Rs. 16,01,720/-, wherein she had declared income from salary, house property and other sources and also income from investing in shares. The assessee claimed exempt income u/s 10 (38) of the Act in respect of long term capital gain derived from sale of listed company's shares of companies M/s Turbo Tech Engineering Ltd. 4 (Rs. 20, 55, 146/-) and M/s Esteem Bio Organic Food Processing Ltd. (Rs. 23, 00, 616/-) where securities transaction tax was duly suffered by assessee. The sales of shares were affected in the stock exchange through a registered share broker after paying STT. Accordingly, the assessee had claimed long term capital gain as exempt under section 10 (38) in the return of income to the tune of Rs. 20,55,146- and Rs. 23,00,616/-. The assessee during the course of assessment proceedings had submitted all the relevant evidences for purchase of shares made in cash by the assessee, along with sale contract notes together with bank statements and Demat statements before the ld AO evidencing the entire transaction of sale of shares being routed through regular disclosed bank statement of the assessee. The aforesaid details and document....
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....- Rs. 1,50,000/- - Date of shares sold 25.02.2014 14.03.2014 (26.03.2014 (2400 shares), 6000 shares) 4800 shares) - 26.02.2014 (2400 shares) and 03.03.2014 (1200 shares) Sale Price per share Rs. 376.22, Rs. 424.154 Rs. 487.50 Rs. 383.62 per share per share and Rs. 397.50 per share Total sale consideration Rs. 23,00,616/- Rs. 25, 44, 924/ Rs. 23,39,976/- - Long Term Capital Gain declared Rs. 21,50,616/- Rs. 23,94,924/- Rs. 22,19,976/- - 7 DOCUMENTARY EVIDENCES SUBMITTED BEFORE AO AND CIT(A): IPO form Pg 33 to 40 of PB Since the issues involved in all the appeals are I dentical and documents submitted are also same, thus, Ms. Swati Luthra's (ITA No. 6480/Del/2017) case may be taken as lead case and the issue may be decided accordingly. Allotment Advice along with share price Pg 41-42 of PB Photocop....
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....come for a consideration or a commission. 7. Before us, Ld. Counsel for the assessee, Mr. Salil Aggarwal submitted that the assessee has filed before the AO and CIT(A) various documentary evidences in order to substantiate the genuineness of the LTCG so declared during the impugned 9 assessment year and no defect, error or any flaw in these evidences has been pointed by the AO as well the Commissioner of Income Tax (Appeals) and thus, he contended that the entire addition needs to be deleted on the ground of lack of investigation/ enquiry and also due to failure to provide any fallacy in the documentary evidences so submitted by assessee and on the aforesaid proposition reliance was placed on the judgments of jurisdictional High Court in the case of CIT vs Fair Finvest Ltd. reported in 357 ITR 147 and PCIT vs Laxman Industrial Resources Ltd. reported in 397 ITR 106.The said documents so submitted by assessee are tabulated as under: For scrip of M/s Turbotech Engineering Ltd. Share Purchase Documents Pg 15 to 17 of PB Share Certificate Pg 18 of PB Share Transfer Form Pg 19 to 21 of PB Contract Note issued by DP Pg 24 to 27 of PB Assessee'....
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....laced on following judgments in support of the aforesaid proposition: (i) KishinchandChellaram vs. CIT. [1980] 125 ITR 713 (SC) (ii) CIT vs Ashwani Gupta. 322 ITR 396 (Del) (iii) Andaman Timber Industries vs CCE (SC) reported in 127 DTR 241. 9. Ld. Counsel further relied on various case laws on the proposition that once the shares are sold through stock exchange and sufficient documentary evidences have been produced in order to support the genuineness of the LTCG claimed as exempt under section 10(38), hence, addition cannot be made in the hands of assessee without rebutting the documentary evidences and without conducting investigation to discard the said documents. The case laws so relied by assessee are tabulated below: Particulars Copy of judgment of Hon'ble Punjab and Haryana High Court in the case of PCIT vs Prem Pal Gandhi 12 in ITA No. 95/2017 dated 18.01.2018. Copy of judgment of Hon'ble Punjab and Haryana High Court in the case of PCIT vs Hitesh Gandhi in ITA No. 18/2017 dated 16.02.2017. Copy of judgment of Hon'ble Bombay High Court in the case of CIT v. Shyam R. Pawar reported in 229 Taxman 256 dat....
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....8. Copy of order of Hon'ble ITAT Delhi in the case of Smt. Shikha Dhawan vs ITO in ITA No. 3035/Del/2018 dated 27.06.2018. Copy of order of Hon'ble ITAT Delhi in the case of Sh. Amitabh Bansal vs ITO in ITA No. 7802/Del/2018 dated 11.02.2019. Copy of order of Hon'ble ITAT Kolkata in the case of Ms. Swati Mall vs ITO in ITA No. 2423/ Kol/2017 dated 07.12.2018. 10. On the other hand, the DR relied on the orders of the lower authorities and filed a written note dated 14.05.2019, which contained list of case laws to be relied by Revenue, wherein, reliance was placed on judgment of Hon'ble High Court of Delhi in the case of Udit Kalra vs ITO in ITA No. 220/2019. 11. In rejoinder, the ld Counsel submitted his arguments, which can be summarized as below: (i) That the ld DR has failed to rebut the case laws so cited by assessee - appellant and also, the SEBI orders, wherein, the companies M/s Esteem Bio and M/s Turbotech have been absolved and no wrong doings have been found in the working of said companies. (ii) That further, the reliance placed by ld DR on the order of Udit Kalra vs ITO (Delhi High Court) in ITA No. 220/2019 ....
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...., Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. The Ld. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the assessee, she was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to all the persons who have brought the scrips in the entire country. Thus, under these circumstances, atleast some inquiry should have done from these persons, whether they have provided any entry to the assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis any adverse inference is drawn, then it cannot be primary evidence or material to nail the assessee and simply based on the statement no addition can be made. This has been held so by various courts, and also by Hon'ble Apex Court in the 17 case of M/s Andaman Tiimber Industries vs. CCE (SC) reported in 127 DTR....
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....with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 14. That the ld DR during the course of hearing placed heavy reliance on judgment of Hon'ble High Court of Delhi in the case of Udit Kalra vs ITO in ITA No. 220/2019. Relevant extracts of said judgment are extracted as below: "The assessee is aggrieved by the concurrent findings of the tax authorities - including the lower appellate authorities rejecting its claim for a long term capital gain reported by it, to the tune of Rs. 13,33,956/- and Rs. 14,34,501/- in respect of 4,000 shares of M/s Kappac Pharma Ltd. The assessee held those shares for approximately 19 months; the acquisition price was Rs. 12/- per share whereas the market price of the shares at the time of ....
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....to the facts of assessee. Thus, we hold that the case of assessee is factually and materially distinguishable from the facts of the case of Udit Kalra vs ITO so relied by ld DR. 16. We further find that Ld. AO has also mentioned about some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the said order seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and 2013 and sold them in year 2014. It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. Thus, even otherwise, we find that the order of SEBI so relied by ld. AO and CIT (A) is not applicable for the transactions under consideration. In any case as stated above, the SEBI in its subsequent decision has absolved most of the companies including the companies whose scrips are under suspicion, as they were nor found to be rigging the price. This fact alone vitiates the case of revenue. 17. We also find that the Ld. AO has raised objection regarding the cash purchase of shares and that shares were dematerializ....
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.... 20. We have further considered the judgement passed in the matter of Udit Kalra (Supra) as relied upon by the Ld. DR before us in support of the case made out by the Revenue. It appears that the challenges made in the appeal before the Hon'ble Delhi High Court in that case stood dismissed in limine; no question of law was found to be formulated. Apart from that the said judgment is distinguishable. In that particular case the scrips of the company were delisted on stock exchange, whereas, in the instant case suspension order in trading in securities of M/s Turbo Tech Engineering Ltd has ultimately been lifted by the adjudication order dated 25.11.2014 wherein SEBI has found no irregularities in the trading of such scrips; neither it has found its Directors involved in any price rigging. Such facts has categorically been mentioned in the judgement of Swati Luthra (supra).Therefore, both factually and materially it is distinguishable from the instant case before us. It is relevant to mention that the orders passed by the SEBI are only of the year 2015 and not during that material point of time i.e. the period between 22.11.2011 and 23.05.2013 when the appellant was holding the shar....