TaxTMI 
TaxTMI 
2021 (11) TMI 221
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....sent case is an individual. The assessee has purchased the shares in off-line mode in cash in the immediate previous financial year of two different companies which were sold in the year under consideration. The details of the same stand as under: S. No. Script D.O.P No. of share Cost (Rs.) D.O.S No. of share Sale value (Rs.) Gain (Rs.) 1 Life Line Drugs Pharma Ltd. 01-04-2013 9900(splitted to 99000) 3,61,377/- After holding for 12 month 99,000 2,39,25,426/- 2,35,63,953/- 2 Mahavir 27-06-2013 6250 50,629/- -Do- 6250 21,79,425/- 21,28,796/- Total 4,12,006/- 2,61,04,851/- 2,56,90,510/- 3.1 The assessee during the assessment proceedings claimed that such gain as long-term capital gain on the sale of listed securities was after the payment of the securities transaction tax. Thus, as per the assessee such long-term capital gain is exempt from tax under the provision of section 10(38) of the Act. 3.2 However, the AO, based on the report of investigation wing of directorate of Kolkata, found that the scripts of the aforesaid companies were us....
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....the name of the assessee is not appearing therein. Likewise, there was also no information in such statements alleging that the assessee was involved in the price fluctuation of the shares of these companies. Furthermore, the materials which were gathered by the investigation wing of Kolkata and the statement of various brokers recorded, based on which the addition was made were not provided to the assessee for his rebuttal. 3.10 In the event, the revenue is going to make reliance on the statement of the parties which are the 3rd parties, the opportunity of cross-examination is sine qua none. Thus the assessee requested to provide the opportunity of cross-examination. There is no prohibition under the provisions of law, restricting the purchases of the shares in off-line mode. As such, SEBI has authorized to make purchases in off-line mode. The purchases made by the assessee in off-line mode were duly supported based on the contract notes wherein the SEBI No. was also mentioned. Thus all the purchases of shares by the assessee were genuine. Likewise, the shares subsequently were dematerialized and were sold through the stock exchange against the payment received through banking ....
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....gain as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT (A). 4.1 The assessee before the learned CIT (A) made similar submission that there was no any evidence brought on record that it was indulged in in dubious transaction or manipulated the price of share. All the materials gathered and statement recorded by the investigation wing do not contain any evidence against assesse. All the statement are of third party which were recorded behind the back of the assessee. Hence, the same does not carry any evidentiary value. Further, no opportunity of cross verification was provided. 4.2 Besides the above, the assessee also submitted that the AO only acted upon the materials or information provided by the directorate of investigation wing of Kolkata Income department. As such no independent enquiry or investigation was carried out by the AO. There cannot be any adverse inference against the assessee based on investigation carried out in case of third party without bringing any evidences against assessee. Further, if large number of people have done something wrong or e....
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....d by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to the doubt about such increase in the price. But in our considered view, this cannot be sole criteria for reaching to the conclusion that the price were rigged up to generate the long-term capital gain which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in details and the same cannot take the place of the evidence. But in the case on hand there was no enquiry conducted by AO independently to establish that the assessee was involved in rigging of share price of the above scripts or assessee exchanged the cash for availing accommodation entry. Similarly, there was no complaint filed by any of the party either by the SEBI or the stock exchange about the assessee or brokers of the assessee that they were involved in the activity of rigging up the price of the shares. Similarly, the AO has not conducted an enquiry from the SEBI or BSE about the a....
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....e also reflected in the balance sheet of the assessee. (ix) The assessee invested in penny stocks which gave rise to huge capital gains in a short period, does not mean that the transaction is bogus as all the documents and evidences have been produced. (x) Opportunity of cross examination was not given which was essential for deciding the issue on hand. 8.5 In our view, just 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 prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such a scheme. In absence of such finding how it is possible to link others wrong doings with the assessee. Further the case laws relied by the AO are with regard to test of human probabilities which may be of greater impact but the same cannot used blindly to dispose of the evidence forwarded by the assessee especially without bringing any evidences from independent enquiry to corroborate the allegation. In holding so we draw support and guidance from the judgment of Hon'ble Delhi High court in case of Pr. CI....
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....nt 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, and the shares were dematerialized and the sales have been routed from de-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 evid....