TaxTMI 
TaxTMI 
2020 (4) TMI 894
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....s unexplained cash credit u/s 68 of the Act and rejecting genuine Long term capital gain of Rs, 3,32,77,358/-and Rs. 9,30,375/- cost of acquisition of the shares sold. 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in confirming commission paid of Rs. 6,87,257/- by treating it as unexplained expenditure under sec 69C of the Income Tax Act, 1961. 4. The Ld.CIT(A) erred in confirming the charging of interest under section 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 5. The Ld.CIT(A) erred in confirming the initiation of the penalty proceeding under section 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961. 6. The Assessee craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing. 3. The assessee has raised two effective issues in the various grounds of appeal. The first issue which of legal nature is that the assessee was not provided the cross examination of those parties who gave statements against the assessee and also that materials used against the assessee in framing the assessment order were not provided to the assessee. The second effec....
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....etailed reply to the said show cause notice filing all the evidences such as details of account payee cheques, copies of contract notes, copy of Demat Account evidencing the purchase and sale of shares duly supported with contract notes, bank statements, evidencing the movement of funds through banking channel and proof of payment of STT and service tax etc. The AO rejected the submissions and contentions of the assessee and came to the conclusion that the said Long Term Capital Gain (LTCG) is a bogus and was just accommodation entry which has been transacted by the assessee in connivance with operators operating on the recognized stock exchange to obtain bogus LTCG.. The Assessing Officer noted that the assessee bought 20000 shares on 4.9.2012 at a price of Rs. 15,00,000/- upon preferential allotment of Rs. 75/- of face value of Rs. 10/- per share and duly transferred in the Dmat account of the assesse. On 21.3.2014 these were split into 10 shares for each exiting share. Thus each shre was spli into 10 shares of the face value of Rs. 1 each and total holding of the assessee after split became 200000 shares. The assessee sold 124050 shares sold the shares after a period of 12 month....
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....or salt; consideration of Rs. 3,42,07,733/-. The appellant declared long term capital gains of Rs. 3,32,77,358/- as against sale consideration received of Rs. 3,43,62,880/-. The paid up capital as on issue of preferential allotment is Rs. 71,46,000/- for 7,14,600/- shares. Thus, there is no basis for the payment of premium of Rs. 65/- per share by the appellant The demat statement on preferential allotment and on spilt of shares is at pp 11 and pp 20 of the paper book filed by appellant and placed at annexure. The details at pp 20 reveal 2,00,000 shares as on 21.03.2014 on split with FV of Rs. 1/- and total value of Rs. 2,20,00,000/-. This demat statement cannot be relied on as the value can only be Rs. 2,00,000/- and not Rs. 2,20,00,000/-. The appellant has not been able to explain to the satisfaction of the Ld. AO nor during appellate proceedings as to how he was allotted equity on a preferential basis - that is which of the promoters allotted the same or if it was part of the non-promoter's group , how he had access for purchase of the same. No application of the appellant for issue of preferential shares and approval of the Board has been furnished. ....
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....es of Rs. 1 and thus the total number of shares held by the assessee after split were 2 lacs shares. Thereafter, the assessee sold 124050 of these shares through broker M/s PPJ Shroff Securities Pvt. Ltd during the period commencing from 04.06.2014 to 19.08.2014 at a total consideration of Rs. 3,43,62,880/-and the Long Term Capital gain of Rs. 3,32,77,358 was made. The learned AR submitted that even the STT and Service Tax was paid on the sale of shares. The ldAR also referred to copies of the said contract notes at page No.51 to 89 of the paper book. The learned AR submitted that the Assessing Officer has primarily relied on the report of investigation wing and thus came to the conclusion that the assessee also alleged bogus transaction/ accommodation entries. The learned AR submitted that the assessee is a genuine purchaser and seller of shares and has purchased and sold shares at the prevailing market prices. The learned AR also submitted that the assessee has filed various documents before the Assessing Officer in order to substantiate the purchase and sale of shares comprising payments proof by account payee cheques, copies of contract notes, copy of Demat Account evidencing t....
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.... Vs. Mrs. Kesar A. Gada 2015 (1) TMI 1220-BOMBAY HIG COURT 18. Ramprasad Agarwal vs ITO2(3)(2), Mumbai [2018] 100 taxmann.com 172 (Mumbai-Trib) 19. Shri Amar Nath Goenka Vs. The ACIT, Circle-20(1), New Delhi. ITA NO.5882/Del./2018 20. Mukta Gupta vs. ITO, Ward -1(4), Ghaziabad. ITA No.2766/Del/2018 21. Ajay Goel Vs. ITO Ward 39(5) ITA NO.4481/DEL/2018 22. Principal Commissiner of Income tax(Central), Ludhiana v. Prem Pal Gandhi (P&H HC) 23. CIT vs Bhagwati Prasad Agrwal ITA No.22/Kol/2019 Calcutta High Court 24. Mr.Shyam R Pawar Vs DCIT Central Circle 24 & 26 ITAT Mumbai(ITA NO.5585/M/11, 5620,5621 &5622/M/11) 25. CIT (Jamshedpur) vs Arun Kumar Agarwal (HUF) Jharkhand HC 26. PCIT (Ludhiana) vs Sh. Hitesh Gandhi P & H HC 27. ACIT central Circle-II, Jalandhar vs Hitesh Gandhi ITAT Amritsar [ ITA No.129(Asr)/2014] 28. Manish Kumar Baid and Mahndra Kumar Baid vs ACIT, Cir-35, ITA NO.1236, 1237/Kol/2017[ Kolkata-Tribunal] 29. Shri JIgnesh Desai vs Income Tax Officer 35(2), ITA NO1263/Kol/2017) [Kolkata-Tribunal] 30. Navneet Agarwal, Legal Heir of Late Kiran Agarwal vs ITO....
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.... 4. Seth Gurumukh Singh v. CIT (1944) 12 ITR 393 5. Jai Karan Sharma vs. DCIT (2012) 23 taxmannc.com 300 (Delhi) 6. Hamish Engineering Industries (P) Ltd. vs. DCIT (2009) 120 ITD 166 (Mum. Trib.) 7. Kishinchand Chellaram vs. CIT (1980) 4 Taxman 29 (SC) 8. C Vasantlal & Co. vs. CIT (1962) 45 ITR 206 (SC) 9. The Ld. A.R. finally prayed that in view of the above facts and the ratio laid down in the various decisions the assessment framed by the AO and as affirmed by the Ld. CIT(A) may kindly be quashed as the same is in violation of principle of natural justice as the information was not confronted to the assessee and also that no cross examination was allowed to the assessee. 10. The Ld. D.R., on the other hand, relied heavily on the order of AO and Ld. CIT(A) by submitting that the assessee is beneficiary of hawala purchase and sale racket which was being operated by some unscrupulous operators on the stock exchange in order to give undue and bogus benefits to the purchasers in order to convert the black money into white. The modus operandi was fully revealed during the course of search conducted on these hawala operators and how the pri....
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..... Pertinent to state that the assessee has paid STT and Service Tax on the said sale of shares. The necessary evidences are filed at page No.59 to 81. Thus the assessee held these shares for more than 12 months and all these transactions were routed through the banking channels. Thereafter, the investigation wing of the department conducted the investigation and searches on various operators in Kolkata and elsewhere and a racket of shares manipulation came to notice of the department. In the said racket the shares were purchased at a very minimal price and after certain period sold at a very astronomical price which is manifold the purchase price. In the whole racket which was found that the various investors were indulged in these transactions in order to book the bogus long term capital gain/short term capital gain and routed their own money in order to convert the same into the long term capital gain. It was also found that these penny stock companies were not having any financial strength or genuine business and the increase in the prices of the share was only through manipulation and connivance with the brokers. The assessee's name was found to be in the list of beneficiary an....
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....s of certain individuals recorded during the course of search who have stated that they were engaged in providing accommodation entries for LTCG/LTCL in various shares which are called penny stocks. However, these information were never provided to the assessee. Similarly, no cross examination was allowed by the AO to the assessee during the assessment proceedings. In other words, the AO has merely relied on the investigation report and did not try to collect further evidences by conducting further investigation to prove that the assessee own funds have changed hands.. Under these circumstances, we are not in a position to subscribe to the conclusion by the authorities below. The case of the assessee is squarely covered by a series of decisions referred and relied by the Ld. A.R. during the course of hearing as reproduced hereinabove a few of which are discussed below:- - In the case of CIT vs. Mukesh Ratilal Marolia (supra). In this case, the issue is whether the amount received by the assessee on sale of shares can be treated as unexplained investment under section 69 of the Act. The Tribunal deleted the addition by allowing the appeal of the assessee by holding that the....
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.... assessee has produced all the relevant records to show the allotment of shares by the company on payment of consideration by cheque and subsequent dematerialization of shares in the D-mat account. The Tribunal reversed the order of AO wherein the AO has made addition by not allowing cross examination to the assessee and also not providing the information to the assessee which were used against the assessee while making addition.The tribunal followed the decision of coordinate bench in the case of Meghraj Singh Shekhawat Vs DCIT ITA No. 444/JP/2017 AY 2013-14 and 2014- 15 which in turn has followed apex court decision in the case of M/s. Andaman Timber Industries vs. CCE Civil Appeal No.4228 of 2006. In the case of Fara Marker vs. ITO (supra) the similar issue has been decided under the similar set of facts by holding that the long term capital gain is genuine as the assessee has fully discharged its onus and AO has not done any further verification. In the case of Kamaladevi vs. Doshi vs. ITO the similar issue has been decided by the Tribunal in favour of the assessee by observing and holding as under: "14. We have given a thoughtful consideration to the....
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....ss examination of Sh. Mukesh Choksi (supra), whose statement was so heavily being relied upon by the A.O, was ever provided to the assessee. We find that the failure on the part of the A.O to provide cross examination of the person, relying on whose statement adverse inferences are drawn in the hands of the assessee goes to the very root of the validity of such adverse inferences drawn in the hands of the assessee, had been looked into by the Hon'ble High Court of Bombay in the case of : CIT-13 Vs. M/s Ashish International (ITA No 4299 P a g e | 26 of 2009; dated. 22.02.2011), wherein the order of the Tribunal was affirmed by the Hon'ble High Court. We thus in the backdrop of our aforesaid observations, are neither able to persuade ourselves to subscribe to the adverse inferences drawn by the lower authorities in respect of the share transactions of the assessee by referring to the stand alone statement of Sh. Mukesh Choksi, as the same as observed by us hereinabove, suffer from serious infirmities, and as such cannot be summarily accepted, nor are able to dislodge the genuineness of the purchase and sale of shares of the aforesaid 10,200 shares of M/s Talent Infoways Ltd.,....