TaxTMI 
TaxTMI 
2021 (12) TMI 586
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....t establish the genuineness of the transaction even when STT is paid. c) The capital gain arising on the sale of shares of AGIL amounting to Rs. 2,54,86,714/- is in genuine and represents unexplained credit u/s. 68 of the I.T. Act. 2. The Ld. CIT(A)-3, Vadodara has further erred in law and in facts in relying on certain enquiries made by him u/s.133(6), the outcome of which is never confronted to the appellant. 3. The Ld. CIT(A)-3, Vadodara has further erred in law and in facts in the finding that the appellant has not furnished the information sought by him vide letter dated 15.01.2018 even when such details / information is already on record. 4. The appellant pleads that the Ld. CIT(A) ought to have accepted that the income of Rs. 2,54,86,714/- as disclosed by the appellant being the income from Long Term Capital Gains is genuine and exempt u/s. 10(38) of the I.T.Act. 5. Your appellant craves liberty to add, alter, amend, substitute or withdraw any of the ground of appeal hereinabove contained. 3. The only issue raised by the assessee is that the learned CIT-A erred in holding that the capital gain of Rs. 2,54,86,714/- as bogus and ....
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....eness of the transactions and sources of the funds received on the sale of shares. 4.4 The assessee regarding the statement of Shri Sanjay Vora- of M/s Anand Rathi Shares & Stock Brokers Limited recorded under section 131 of the Act dated 08-04-2015, contended that such a statement was taken behind the back and the opportunity of cross examination was not provided which is against the principle of natural justice. Therefore, no credence can be attributed to such a statement while deciding the issue on hand. The assessee also contended that he has sold the shares through the involvement of his broker namely M/s Nirmal Bang Securities Pvt. Ltd. who has not been questioned by the Revenue. As such the assessee has no connection of whatsoever with Shri Sanjay Vora (Anand Rathi Share & Stock Brokers Ltd.) as far as the purchase and sale of shares made by him. 4.5 The transactions for the purchase and sale of the shares were carried out through the banking channel which explains the source of investments. On the sale of the shares on exchange through the brokers, the STT was duly paid. All the transactions relating to the purchase and sale of shares were carried out in good faith an....
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....tions, the SEBI has suspended it as a part of surveillance measures. c. The assessee has not sold his entire shareholdings for the reasons that SEBI initiated surveillance proceedings on the trading of the script of the company M/s AGIL due to abnormal rise in the price of the shares and huge trade volume during the period starting from January 2013. Furthermore, the assessee booked the required predetermined profit by selling only 75% of his holding. d. The statements of Shri Soumen Chowdary and Shri Sanjay Vora has been used as an evidence that the company M/s AGIL was used to generate bogus share capital. In fact there were many surveys and search operations carried out at Kolkata, Mumbai and Delhi by the Directorate of Investigation of the Income Tax Department to unearth the parties involved in generating the bogus share capital gain for certain class of beneficiaries against the commission. As a result of these operations, many companies were brought on record which were used for generating the bogus transactions including the company M/s AGIL. Accordingly, it was not necessary to provide the opportunity of cross examination to the assessee. e. The ....
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.... books of accounts in exempt LTCG u/s.10(38) of the Act is added to the total income of the assessee." 5. Being aggrieved the assessee preferred to appeal to the learned CIT (A) 5.1 The assessee before the learned CIT (A) submitted that he purchased the share of M/s AGIL on preferential allotment basis and duly complied with the guideline of the SEBI and stock exchange with regard to offline purchase of shares. The assessee in support furnished copy of relevant guidelines issued by the SEBI. The assessee claimed that the payment for purchase of share was made through banking channel and during assessment proceeding, furnished copy of bank statement reflecting payments toward share purchase. Hence the AO's finding that sources of payment for share was not proven is factually incorrect. 5.2 With regard to the AO finding that the transaction of purchase of share is not in conformity with SEBI circular no. SMDRP/Policy/CIT-21/99, the assessee submitted that in the impugned circular the negotiated deal including cross deal is banned in connection of dealing in Government securities only. The assessee in support of his contention furnished the copy of impugned circular and highl....
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....,000,00 shares of Rs. 5/-each. Further he had sold 7,60,003/- shares for Rs. 3,15,89,794/- on average price ranging from Rs. 38 to 41 per share out of 10,00,000/- shares through broker M/s Nirmal Bang Securities Limited through the platform of BSE and the assessee has credited an amount of Rs. 2,54,86,714/- in the form of exempt income u/s 10(38) of the Income Tax Act. As shall be evident the issue is essentially factual, revolving or centering around as to which of the two inferential findings are maintainable in law, i.e., in view of the surrounding facts and circumstances of the case. The only charge is qua the genuineness of the transaction/s, and which the appellant could not able to give any supporting documentary evidence as envisaged by the A.O that no details of physical delivery of shares and transactions slips. That genuineness could validly be tested on the ground or principle of preponderance of human probabilities, which could thus form a valid ground or parameter for determining the genuineness, stands since settled by the apex court in Sumati Dayal (supra), relied upon, wherein the apex court, in declaring the transaction as non-genuine, discarded a host of document....
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....rovide the date of clearance of cheque for the said purchases of the share. However, the appellant remained silent and not responded to the said letter. The information in respect of AGIL was also requisitioned from the A.O of that company who vide his reply dated 05.02.2018 has furnished copy of returns of Alpha Graphics India Ltd. for A.Y.2012-13 to 2017-18. For A.Y.2012-13, the A.O has made addition on account of unexplained increase in share capital & increase in reserve & surplus of Rs. 18.00 Crore, Amortization expenses debited in P & L Account of Rs. 17,69,656/- and cash deposit of Rs. 4,50,000/-. For A.Y.2014-15, the A.O has made addition on account of unsecured loans u/s.68 of the Act of Rs. 1.49 Crore. The said company has actually not done any business and can be treated as a "Shell Company" when we consider the financial transaction of the same. 6.14 It needs to be appreciated that what is essentially under cloud, and being seriously doubted as to the genuineness, is the gain stated to arise on the transaction. It is the gain which is abnormal, i.e., both qua the scrip; its' trading and, thus, its quantum, and unexplained, besides being tax exempt,....
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....y the order of the learned CIT (A) the assessee is in appeal before us. 6.1 The learned AR before us filed a paper book running from pages 1 to 114 and summary of case laws and contended that the assessee was not involved in rigging up the price of the scripts. Likewise, there was no opportunity of cross-examination of the statements/details obtained by the investigation wing of Calcutta was provided. Thus, in the absence of such verification, there cannot be any addition to the total income of the assessee by treating the long-term capital gain as unexplained cash credit under section 68 of the Act. 6.2 On the contrary, learned DR vehemently supported the order of the authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the long term capital gain declared by the assessee on sale shares M/s AGIL for Rs. 2,54,86,714/- was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph. Subsequently, the learned CIT (A) upheld the finding of the AO. ....
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....'s action that he was involved in such rigging up of share price should be established based on cogent materials. The allegation as discussed above implies that there was cash exchanged for taking exempted income by way of long term capital gain by way of cheque through banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the Revenue. 7.4 We further note that authorities below have alleged that share purchase contract note was not provided. Similarly mode of payment for purchase of share was also not explained. In this regard we note the assessee vide letter dated 27th December 2016 before the AO has furnished following detail: (a) Ledger account of investment in share of AGIL placed on page 40 to 42 of paper book. (b) Share certificates of M/s AGIL were placed on page 43 of the paper book. (c) Application for dematerialization of share of AGIL was placed on page 44 of paper book (d) Bank statement showing transaction of purchase and sale of share of AGIL placed on page 68 to 82 of paper book. 7.5 Thus, we are of the view that finding of the authorities below to this extent is contrary to the fac....
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....that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought any evidence 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. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under: "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 ....
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....uccessfully 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 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 ....