TaxTMI 
TaxTMI 
2021 (7) TMI 902
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.... failed to appreciate that the transaction of purchase / sale were genuine and all the requisite prescribed conditions were in existence and hence the addition / disallowance has no legs to stand and deserves to be held ab initio null & void. 4. That the authorities below failed to appreciate that the appellant is simply a genuine customer and the transaction was made through proper D-Mat account and the sale purchase effected per approved share brokers and cannot be held to be accountable simply on the basis of 'quite unusual and unbelievable' based upon imagination and baseless grounds. 5. That the revenue authorities failed to appreciate that for losses the entire burden is on the appellant's shoulders and to the contrary the gains are held 'non genuine' which is against the principle of equity, justice and good conscience. 6. That the Ex Parte order based u/s 144 of the IT. Act 1961 is a straight denial of a reasonable and sufficient opportunity viz. absence of cross examination of witnesses a right the appellant legally deserves under the provisions of law leading to a hasty decision simply to adhere limitation. 7. That the authorities below simply ....
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....f Sumati Dayal Vs CIT [1995] 214 ITR 801, [which has been relied on by learned CIT(A)], has dismissed the theory of preponderance and has relied on the theory of evidence and has dismissed the appeal of the Revenue. It was submitted that various benches of the Tribunal including the Lucknow Bench, under similar facts and circumstances, have already decided the issue in favour of the assessee in the following cases: i) Shri Deepak Kumar Agarwal Vs. ACIT Central Circle - 3(1), IN IT(SS)A Nos. 125&I26 /KOL/2018 dated 10-05-2019 A.Y 2013- 14 & 2014-15 decided by the ITAT 'B' Bench Kolkata relating to M/S Sulabh Engineering Services Ltd (SESL). ii) Sanjay Kumar Agarwal (HUF) Vs. ITO Ward 48(4) Kolkata in ITA No. 2378/Kol/2018 dated 07-08-2019 decided by the ITAT "SMC" Bench Kolkata relating to M/S Sulabh Engineering Services Ltd.(SESL). iii) Suman Kothari Vs. ITO Ward 36(2) Kolkata in ITA No. 2467/Kol/201 Tdated 10-05-2019 decided by ITAT "B" Bench Kolkata relating to M/S Sulabh Engineering Services Ltd.(SESL). iv) Vasudha Jain Vs. ITO Ward 36(4) Kolkata in ITA No. 1018/KoI/2018 dated 15-02-2019 decided by ITAT "SMC" Bench Kolkata relating to M/S Sulabh Engineering Servi....
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....e assessee wherein the said broker had sold 15,000 shares to the assessee for Rs. 21/- per share, a copy of such sale bill is placed at page 24 of the paper book and a copy of ledger account of the assessee appearing in the books of Anant Fin Consultancy (P) Limited, placed at page 25 of the paper book wherein it has been confirmed that an amount of Rs. 3,15,000/- was received from the assessee against the sale of 15,000 shares to the assessee. Such amount of Rs. 3,15,000/- was debited to the bank account of the assessee maintained with United Mercantile Co-operative Bank Ltd., a copy of which is placed at page 23 of the paper book. Such 15,000 shares purchased by the assessee became 1,50,000 shares of face value of Rs. 1/-, the evidence of split of the shares from Rs. 10/- each share to Rs. 1/- each share is placed at pages 17 & 18 of the paper book. Such 1,50,000 shares were credited to the DEMAT account of the assessee maintained with Bonanza Portfolio Limited, the evidence of which is placed at page 19 of the paper book. The assessee sold such 1,50,000 shares between the period 05/08/2013 to 12/09/2013, the copy of contract notes issued by Indiabulls Securities Limited is place....
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....iple of preponderance and has held that evidence produced by the assessee over power the principle of preponderance. In the case law decided by Hon'ble Delhi High Court in the case of Krishna Devi, the Tribunal allowed relief to the assessee on Long Term Capital Gain on the scrip of Goldline International Finvest Ltd. which appear at Sl.No.24 of the investigation report. The findings of Hon'ble Delhi High Court are reproduced below: "3. The present appeals under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as the 'Act'] are directed against the common order dated 6th August, 2019 [hereinafter referred to as the 'Impugned Order'] passed in ITA No. 1069/DEL/2019 (for AY 2014-15), 2772/DEL/2019 (for AY 2015- 16) and other appeals for the same AYs, by the Income Tax Appellate Tribunal [hereinafter referred to as the 'ITAT']. However, the Impugned Order records the factual position only in respect of ITA No. 1069/DEL/2019. 4. The Revenue urges identical questions of law in all the afore-noted appeals with the only difference being the figures relating to the additions made under Section 68 read with Section 115BBE of the Act. Accordingly, the same are ....
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....ucted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. xx xx xx 23. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm 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 a....
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....arlier dates as void. xx xx xx 30. Considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the DR would do no good on the peculiar plethora of evidences in respect of the facts of the case in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand." 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6 th September, 2019, the appeals are maintainable in view of the Office Memorandum dated 16th September, 2019 issued by the CBDT, which clarifies that the monetary limits prescribed in the aforementioned circular shall not apply where an assessee is claiming bogus LTCG through penny stocks, and the appeals be heard on merits. 7. Mr. Zoheb Hossain, learned senior standing counsel for the revenue (Appellan....
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....asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for th....
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....e-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the ....
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....boration on the basis of cogent material does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. 6. As regards the reliance placed by Learned CIT(A) on the case of Sanjay Bimalchand Jain decided by Hon'ble Bombay High Court, we find that the above said case law has been distinguished by Hon'ble I.T.A.T. Kolkata Bench in ITA No. 2243/Kol/2017 where the Hon'ble Tribunal vide para 31 held as under: "31. We note that the Id. D.R. had heavily relied upon the decision of the Hon'ble Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017. We note that in the case relied upon by the Id. D.R, we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by trea....
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....in that case the Hon'ble High Court has only dismissed the appeal as the Hon'ble High Court found that the issue involved was only a question of fact. In this respect, para 28 of the Tribunal order in the case of Karuna Garg is relevant which is reproduced below: "28. The DR heavily relied upon the judgment of Hon'ble High Court of Delhi in the case of Udit Kalra Vs. ITO in ITA No.220/2019. We have carefully perused the order of the Hon'ble High Court and on going through the said judgment we find that no question of law was formulated by the Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine as the Hon'ble High Court found that the issue involved is a question of fact." 6.4 Similarly in the case of Swati Luthra (supra), the Hon'ble Tribunal while dealing with the case law of Udit Kalra vide para 14 has held as under: "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 ....
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....at case the scrips of the company were delisted on stock exchange, whereas, in the instant case, the interim order of SEBI in the cases of M/s Esteem Bio and M/s Turbotech have been cooled down by subsequent order of SEBI placed by assessees in its paper book. Thus, the case of Udit Kalra vs ITO relied by ld. DR is clearly distinguishable on facts and is not applicable 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." Therefore, the above case laws relied on by learned CIT(A) is not applicable to the facts and circumstances of the present case. 8. Besides the reliance placed by Learned counsel for the assessee on the order of Hon'ble Delhi High Court in the case of Smt. Krishna Devi, Learned counsel for the assessee has also relied on various case laws wherein under similar facts and circumstances and in the same scrip of Sulabh Engineers, various Benches of the Tribunal have allowed relief to the assessee. The Lucknow Bench of the Tribunal in the case of Uma Shanker Dhandhania vs. Income Tax Officer (1)5, Kanpur in ITA Nos. 475 & 681/LKW/2019 where....
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..../03/2014 (PB-26) and on sale of 30,000 shares during AY 2015-16, balance shares are reflected at 8,58,300 as on 31/03/2015 (PB-27). These balance shares of 8,58,300 are reflected in the Demat statements upto 31/03/2019. From the Demat statement, we further observe that assessee was holding certain other scrips also. The assessee, therefore, had filed sufficient evidences to prove the genuineness of the transactions but authorities below has rejected the claim of the assessee on the basis of an investigation report of the Department whereby the scrip was held to be penny stock which was being used for providing bogus long term gains. We find that the Kolkata Tribunal in ITA 2467/Kol/2017, vide order dated 10.5.2018 has considered a similar issue of the same scrip M/s Sulabh Engineers and Services Ltd. and has allowed relief to the assessee by holding as under: "7. We have heard both the parties and perused the material available on record. We note that the assessee has submitted before us the statement showing purchases and sale of long term capital gain on sale of equity shares (PB-1). The assessee submitted allotment advice for 75,000 shares of M/s Sulabh Engineers and Services ....
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....nized exchange through the authorized broker and all relevant supporting documents have been submitted before the learned Assessing Officer. Further, learned Assessing Officer has also added Rs. 56,065/- on account of undisclosed commission payment @ 0.5% of the Long Term Capital Gain that had been assumed to be incurred to arrange bogus Long Term Capital Gain amounting to Rs. 1,12,13,010/-. We note that the scripts / equity shares of M/s Sulabh Engineering and Services Ltd. has been dealt with by the SMC Bench of this Tribunal in the case of Vasudha Jain, in ITA No.1018/Kol/2018, for A.Y. 2015-16, order dated 15.02.2019, wherein the SMC Bench of this Tribunal held that addition has been made by AO mainly on the basis of 'suspicion' and 'probability'. No price rigging established by AO. The ld AO as well as ld CIT(A), were guided by the report of the Investigation Wing, which is general in nature and no specific findings for the assessee, and hence based on these facts the SMC Bench deleted the addition, observing the following. "13. The ld AR also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onu....
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.... note that in the case relied upon by the ld. D.R, we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 16. It is clear from the above that the facts of the case of the assessee are similar with the facts in the cases wherein the co-ordinate bench of the Tribunal has deleted the addition and allowed the claim of LTCG on such sale of shares Therefore, respectfully following the same ratio, I am inclined to set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and o....
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....on'ble Delhi High Court. The relevant findings of Hon'ble court are reproduced below: "3. The present appeals under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as the 'Act'] are directed against the common order dated 6th August, 2019 [hereinafter referred to as the 'Impugned Order'] passed in ITA No. 1069/DEL/2019 (for AY 2014-15), 2772/DEL/2019 (for AY 2015- 16) and other appeals for the same AYs, by the Income Tax Appellate Tribunal [hereinafter referred to as the 'ITAT']. However, the Impugned Order records the factual position only in respect of ITA No. 1069/DEL/2019. 4. The Revenue urges identical questions of law in all the afore-noted appeals with the only difference being the figures relating to the additions made under Section 68 read with Section 115BBE of the Act. Accordingly, the same are being decided by way of this common order. 5. It is not in dispute, as noted in the Impugned Order, that the factual background in all the three appeals is quite similar. However, for the sake of convenience, the facts in respect of ITA 125/2020 are being noted and discussed elaborately. Briefly stated, the Respondent-Assessee is an individual who....
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....oss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm 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 ....
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....d do no good on the peculiar plethora of evidences in respect of the facts of the case in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand." 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6 th September, 2019, the appeals are maintainable in view of the Office Memorandum dated 16th September, 2019 issued by the CBDT, which clarifies that the monetary limits prescribed in the aforementioned circular shall not apply where an assessee is claiming bogus LTCG through penny stocks, and the appeals be heard on merits. 7. Mr. Zoheb Hossain, learned senior standing counsel for the revenue (Appellant herein), contends that the learned ITAT has completely erred in law in deleting the addition, and thus the Impugned Order suffers from perversity. He submits that there are certain germane factual errors, inasmuch as the learned ITAT has wrongly recorded that there was no independent enquiry conducted by the AO, when in fact the AO had issued noti....
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.... at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. ....
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.... Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and r....