TaxTMI 
TaxTMI 
2022 (7) TMI 1205
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....ii. The Ld. CIT(A) erred in ignoring the findings of the SEBI, holding that SEBI orders are against companies and not against individual traders, ignoring the fact that the SEBI order clearly brings out the modus operandi employed by the company "M/s. Out of City Travel Solutions Ltd." to route unaccounted money back to the books of the beneficiaries. iv. The Ld. CIT(A) erred in holding that the transactions are genuine just because the payment was made through banking channel and shares were demated. v. The Ld. CIT(A) erred in ignoring the fact that the penny scrip without any fundamentals had humongous gains defying logic or human probabilities as held in the Apex Court's decision in the case of CIT vs. Durga Pasad More. vi. The Ld. CIT(A) erred in deleting the addition made u/s. 69C on account of unexplained expenditure holding the there is no evidence of the same, and also ignoring the fact that the assessee had to incur some expenditure to get the artificial gains. vii. The Ld. CIT(A) erred in treating the sale of land as "Capital Gain" when in the 3CD report and in the statement recorded of the assessee, he clearly states that he is in ....
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.... long term capital gain. The investment made by assessee is recorded in books of account as investment being capital assets. The A.O. has referred to statement of assessee as reproduced in assessment order at Page 20 to 27 to conclude that assessee has admitted that he is carrying on business in Real Estate. Hence he held that income/gain on selling of immovable properties is liable to be assessed as business income. Accordingly, the A.O. assessed surplus arising on sale of immovable properties as income under the head "Income from Business & Profession". 6. Against the order passed by the Assessing Officer, assessee appealed before learned CIT(A) wherein detailed submission were made to submit that various additions made in the assessment framed are unjustified. The learned CIT(A) has dealt with the facts and evidences on record and discussed legal precedents extensively while granting relief in the case of assessee 7. Aggrieved by the order of Ld. CIT(A), now Revenue is in appeal before us on the grounds of appeal mentioned hereinabove. 8. Ground 1 to 5 of appeal are interlinked and interrelated and relates to challenging order of Ld. CIT(A) allowing the relief in case o....
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....sold in open market on screen based trading at BSE during the period from Dec. 2013 to Jan. 2014. The details of sale have been reproduced in assessment order at pages 12 to 14. The details as reproduced in assessment order indicate the time of trade as well as market rate at which the aforesaid transaction has been completed. The aforesaid transaction in respect to sale of shares is corroborated by contract notes of the registered broker which were also placed on record before A.O. and also before me in the appellate proceedings. The genuineness of contract notes is beyond doubt. The perusal of contract note indicates that security transaction tax has been paid on the transaction in respect to sale of shares by appellant. In the course of assessment proceedings the ledger account of appellant with registered broker wherein sale proceed of shares were being credited and remittance of same to the account of appellant through proper banking channel was reflected. The genuineness of account of assessee with registered broker is also beyond doubt. A.O. scanned and pasted graph to indicate activity of shares trading in respect to company in which appellant has made investment. The afore....
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.... and his family members wherein A.O. in the assessment framed u/s. 153A of Income Tax Act 1961 pursuance to search action u/s. 132(1) on 20/01/2005 had concluded that the sale proceeds in respect to sale of shares is bogus and thus same were liable to be assessed u/s. 68 of Income Tax Act 1961. The order passed by A.O. was challenged in appeal. The aforesaid disputed issue has been considered by various appellate authorities from CIT(A) onwards. The matter in case of Shri Kamal Kumar Agrawal has travelled from CIT(A) to that before Hon'ble Apex Court in SLP. The appellate orders have been relied upon by the appellant to draw support that the transaction in case of appellant cannot be doubted and genuineness of the same cannot be disputed in terms of ratio laid down in the appellate orders of Shri Kamal Kumar Agrawal and others. In case of Shri Kamal Kumar Agrawal the relevant extract from the orders of CIT(A) is reproduced hereunder:- Legal Position Applicability of Section 68 of the IT Act, 1961? It is further submitted that the addition made by AO under section 68 of I.T. Act, 1961 is wholly unjustified both on fact and in law. Various individual as....
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....4 of his letter dated 14-03-2007 is regarding the head of income under which he has taxed the LTCG in the hands of assessee. For the sake of ready reference the same is reproduced below: "4. Reg. the head under which the gain is taxable: It is adequately discussed in the asstt. orders as to why the gain arising to the assessee on sale of shares is not a Long Term Capital Gain. It may be reiterated that the 'profit on sale of shares' is, under no circumstances, taxable as Long Term Capital Gains, which enjoy a concessional rate of tax, in the light of the facts narrated in the asstt. orders." This shows the A.O. has no specific reply regarding applicability rather inapplicability of section 68 in the matter at hand. I have given a deep thought to this matter. It is an undisputed fact on record that the appellant himself in his original returns filed prior to search has shown Long Term Capital Gain on account of transactions in the same scrips which have been considered in the assessment framed u/s. 153A. Thus there was no suppression either of facts or income on the part of appellant. The sale proceeds of shares were duly declared in the original return and....
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....ained cash credit u/s. 68. The assessee approached the Hon'ble ITAT with then plea that it had already declared that particular sum as income in the profit and loss account and provisions of section 68 are not applicable to the facts of the case. Identical situation is prevailing in the case of the present appellant. The Hon'ble ITAT on the said order of the CIT u/s. 263 decided the matter in favour of the assessee by giving following finding which is squarely applicable to the present appellants case. "The amount which has already been declared as income in the case of assessee cannot be considered for the purpose of invocation of provisions of sec. 68 of IT Act, 1961. The provisions of sec. 68 can be invoked to sums credited by assessee which are claimed by assessee to be on account of capital, loans or such other receipts which are not chargeable to tax. The provisions of sec. 68 authorises the revenue authorities to assess any sum credited in its books of accounts as income which assessee claims to be not in the nature of income. The provisions of sec. 68 authorises the revenue authorities to assess any sum credited in its books of accounts as income which asse....
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....lained cash credits u/s. 68. In the circumstances of the case and in view of aforecited judgments. I hold that sec. 68 has been wrongly and unnecessarily invoked by the AO to tax the LTCG as unexplained cash credit in the hands of the appellant. Thus, I find addition u/s. 68 cannot be sustained. This finding is further fortified by the fact that all the share transactions have already been held as genuine by me while discussing factual position with regard to same (supra). The addition made by the AO of Rs. 52,24,000/- u/s. 68, therefore, deserves to be deleted. The perusal of extract from the appellate order is reproduced hereinabove clearly explain the legal position as regard to assessment of long term capital gain u/s. 68 of Income Tax Act 1961. Applying the legal position to the facts in the case of appellant addition made is unjustified. 6.6 The order passed by CIT(A) in case of Shri Kamalkumar Agrawal was challenged by revenue authority before ITAT Nagpur Bench, Nagpur and appeal was registered as ITA No. 118 to 122/Nag/2007. Before Hon'ble ITAT contention was raised by revenue that SEBI had passed an order in respect to transaction of sale of shares of....
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....e made by appellant nor name of appellant is appearing. Considering the totality of facts SEBI order relied upon by A.O. can have no adversity in case of appellant as it does not implicate the transaction of appellant or that of company in which investment has been made by appellant. 6.7 The order of ITAT Nagpur Bench, Nagpur in case of Shri Kamal Kumar Agrawal was challenged by revenue authorities before the Hon'ble Bombay High Court and appeal of revenue was dismissed vide judgment dated 23rd Oct. 2009 by consolidated order in ITA No. 41/2010. The relevant extract from the judgment of Hon'ble High Court is reproduced hereunder: "5) In Income Tax Appeal No. 41/2010, the respondent assessee had purchased 30,000 shares of M/s. Authentic Investments and Finance Ltd. on 8.4.1999 at the rate of Rs. 0.98 per share. These shares were claimed to have been sold on 7/7/2000, 14/7/2000 and 21/7/2000 at an average value of Rs. 33.81 per share. In the assessment year in question, the assessee offered to tax the capital gains arising from sale of the above shares, amounting to Rs. 9,84,909/- as a long term capital gain. The same were accepted." The sole conten....
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.... were in fact purchased by the assesses on the respective dates and the Company has confirmed to have handed over the shares purchased by the assesses. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assesses were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assesses. Therefore, the fact that some of the transactions were off market transactions cannot be a ground to treat the transactions as sham transactions. 13) The statement of Pradeep Kumar daga that the transactions with the Haldiram Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessee were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought to our notice that the findings recorded by the Tribunal are contrary to the documentary evidence ....
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....h Court while holding that the transaction of sale of shares is genuine. The ratio laid down by Hon'ble Bombay High Court squarely applies to facts in case of appellant and the addition made by A.O. is unjustified and unsustainable. It is worthwhile to mention that SLP filed by revenue against the order of Hon'ble Bombay High Court has been dismissed vide judgment of Apex Court dated 08/08/2011 in Civil Appeal No. CC12497/2011. 6.9 The Hon'ble Bombay High Court in Income Tax Appeal No. 456/2207 in case of CIT Vs. Shri Mukesh Ratilal Mordia in its judgment dated 07/09/2011 had considered the case of assessment of long term capital gain on sale of shares of four companies. The facts as seen from the order of ITAT would show that the addition made in the said case was considering the modus operandi similar to as discussed in assessment order of appellant. In the aforesaid case A.O. had come to conclusion that the shares sold by appellant are bogus transaction. The Hon'ble ITAT had concluded that the transaction in respect to sale of shares is supported by legal evidence and cannot be rejected on inferences. The ratio laid down by Hon'ble Bombay High Court ....
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....We have no hesitation to say that the findings of the lower authorities are totally based on presumptions and surmises, without any enquiry. After considering direct evidences brought on record by the assessee and the findings of the Hon'ble Jharkhand High Court (supra), we have no hesitation to hold that the transaction has resulted into Long Term Capital gains as shown by the assessee. We therefore direct the AO to accept the gains as Long Term Capital Gains." * Sri Dolarrai Hemani v. ITO (ITA 19/Kol/2014) (Kolkata Tribunal) wherein it has been held as under: "2.9.5. We find that the similar issue had been adjudicated by the coordinate bench of this tribunal in the case of DCTT vs. Sunita Khemka in ITA Nos. 714 to 718/Kol/2011 dated 28.10.2015 and in the case of ITO vs. Rajkumar Agarwal in ITA No. 1330 (Kol) of 2007 dated 10.8.2007 wherein it was held that when purchase and sale of shares were supported by proper contract notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognized broker and the sale considerations were received by account payee cheques, the transact....
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....d. on the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT(A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT(A) at para 3 to 5 has not been controverted by the department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A). Moreover, issue is also covered by the decision of jurisdictional High Court in the case of Shyam R. Pawar (supra), wherein under similar facts and circumstances, transactions in shares were held to be genuine and addition made by AO was deleted. Respectfully following the same vis-a-vis findings recorded by CIT(A) which are as per material on record, we do not find any reason to interfere in the order of CIT(A)." * CIT v. Shri Mukesh Ratilal Marolia (6 SOT 247) (Mumbai ITAT) upheld in (ITA 456 of 2007) (Bombay High Court) wherein it has been held as under: "10.3 Purchase and sale of shares outside the floor of Stock Exchange is not....
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....e addition made by A.O. is unjustified and is directed to be deleted. Ground of appeal is allowed." 9. The learned DR referred to various facts observed in assessment order to submit that sale proceeds of shares is liable to be assessed as unexplained cash credit u/s. 68 of IT. Act 1961. The learned DR placed strong reliance on the order of the A.O. to submit that relief granted by CIT(A) is not proper and order passed by A.O. be restored. 10. The Counsel of assessee before us has made submission which is reproduced hereunder: A) The assessee had acquired 2,00,000 shares of M/s. Out of City Travel Solutions Ltd. in preferential allotment at premium of Rs. 22/- per share with lock in period of one year (P.1). Investment of 2,00,000 shares at Rs. 46,00,000/- made in Asstt. Year 2013-14 shown in Balance Sheet (P.3). Regular assessment for Asstt. Year 2013-14 is made u/s. 143(3) of Income Tax Act 1961. Purchase of shares stood accepted and has achieved finality (P.4 & 5). i) Letter of allotment dated 20/10/2012 (P- 1) [Vol.-III] ii) Financial Statement (P- 3) [Vol.-III] iii) Regular assessment order (P- 4 - 5) [Vol.-III] B) Assessee du....
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....in ITA No. 125/2020 fully supports the case of assessee. (P-1 to 10) (7, 8, 9, 10) I) i) The assessee invites attention to the case of Shri Kamal Kishore Agarwal and family members wherein Revenue Authorities had concluded that sale proceeds of shares are liable to be assessed u/s. 68 of Income Tax Act 1961 and is bogus transaction. ii) The appeal of Shri Kamal Kishore Agarwal was disposed by order dated 17/04/2007 in Appeal No. CIT(A)-1/1022/2006-07. The Hon'ble CIT(A) after extensively examining the facts and legal position in the said case has accepted the claim of assessee that the transaction was genuine and directed to delete the addition made by A.O. u/s. 68 of Income Tax Act 1961. iii) The aforesaid departmental appeal was disposed by order dated 24th July 2009 wherein various contention raised by revenue were rejected and appeal of revenue was dismissed. The Hon'ble ITAT had also taken note of decision of SEBI in the case of Share Brokers and its effect on share transaction. iv) Order passed by Hon'ble ITAT Nagpur Bench, Nagpur was challenged by revenue authorities before the Hon'ble Bombay High Court by filing an appeal ....
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....le price of capital assets is shown as income liable to be assessed under head capital gain and is not shown as liability. Provisions of section 68 are inapplicable. Reliance on: Hon'ble ITAT, Nagpur Bench, Nagpur in case of Datta Meghe Institute of Medical Sciences in ITA No. 07/Nag/2007 vide order dated 16/03/2007. (P-1 to 17) (12) [Vol.-I] L) No observation is made in respect to transaction of assessee or is relating to company in which investment has been made by assessee. The information as may be available with A.O. has neither been confronted nor made available to assessee to have his say on the same. Such information is liable to be excluded for framing assessment considering the principle of natural justice. Reliance on: i) Hon'ble Supreme Court order in Civil Appeal No. 4228 of 2016 in the case of M/s. Andaman Timber Industries vide order dated 02/09/2015. M) The various decision as discussed in assessment order are not in relation to transaction of shares. Thus ratio laid down in the said decision is inapplicable to the facts in case of assessee. N) More so, when the entire transaction of ass....
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....nuineness of contract notes is beyond doubt. The perusal of contract note indicates that security transaction tax has been paid on the transaction in respect to sale of shares by assessee. In the course of assessment proceedings ledger account of assessee with registered broker wherein sale proceeds of shares were being credited and remittance out of same to the account of assessee through proper banking channel was reflected. The genuineness of account of assessee with registered broker is also beyond doubt. A.O. scanned and pasted graph to indicate activity of shares trading in respect to company in which assessee has made investment. The aforesaid graph pasted in assessment order is at page 8 and demonstrates that shares are being regularly traded at BSE. Onus to explain the transaction of sale of shares has been satisfactorily discharged on which long term capital gain has been declared in return. Perusal of assessment order does not show that there is any material or evidence on record to impeach the genuineness of transaction of sale of shares by assessee. A.O. has merely drawn adverse inference by observing modus operandi and making general observations. The A.O. has not bro....
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....out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration 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. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s. Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. ....
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....annot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. 12) From the documents produced before us, which were also in possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective date sand the Company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off- market transactions. However, the purchase and sale price of the shares declared by the assessees were inconformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off market transactions cannot be a ground to treat the transactions as sham transactions. 13) The statement of Pradeep Kumar Daga that the transactions with the HaIdiram Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the ....
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....the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by the CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We note that various adverse inferences drawn by A.O. in assessment order have been correctly dealt with in his appellate order and does not call for any interference. We are in agreement with the findings and reasoning recorded by CIT(A) in his appellate order reproduced hereinabove deleting the addition in the case of assessee. 19. Considering totality of facts and circumstances in the case of assessee and considering legal evidence on record. We hold that that addition made by A.O. is unjustified and unsustainable. We uphold the order of CIT(A) deleting addition made in the assessment framed. Grounds of appeal 1 to 5 of revenue are dismissed. 20. Ground 6 of appeal of revenue relates to challenging the order of Ld. CIT(A) allowing the relief in case of assessee by deleting the addition made by A.O. u/s. 69C on account of unexplained expenditure. The assessee has made detailed written submission before Ld. CIT(A). In appellate order Ld. CIT(A) has deleted....
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....ould be made u/s. 69C of IT. Act 1961. C) Addition on inference/assumption cannot be made u/s. 69C in the absence of requisite conditions as per provision of sec. 69C of IT. Act 1961. D) CIT(A) has correctly deleted the addition for detailed reasons given in appellate order. 23. In case of assessee addition has been made u/s. 69C of Income Tax Act 1961 at Rs. 28,67,126/- as alleged expenditure on account of commission paid for bringing back money in his books as bogus long term capital gain. A.O. has computed the aforesaid sum as being 5% of sale proceeds of shares reflected in books of account. The A.O. has made addition as according to him the transaction of sale of share was bogus. The very premise for which the addition is made has been held to be not correct and thus consequent addition made by A.O. for alleged expenditure is unjustified and unsustainable. It is seen that the A.O. has made adverse inference which is not based on any material or evidence on record. A.O. has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require to be explained by assessee. It is settled position of law the onus ....
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.....O. in respect to assessment proceedings is unjustified. In case of appellant the property having been held for more than 36 months as investment indicates that the intention of acquisition of property was to hold the same as capital assets and thus surplus arising on the same correctly declared to be assessable under the head long term capital gain. I therefore hold that no fault can be found with regard to income declared under the head long term capital gain on sale of property. A.O. is directed to accept the long term capital gain as shown in return of income and addition made in the assessment framed on account of business income is directed to be deleted. The ground of appeal is disposed of as per direction given hereinabove." 25. The learned DR placed reliance on the order of the A.O. to submit that relief granted by CIT(A) is not proper and order passed by A.O. be restored. 26. The counsel of assessee before us has made submission which is reproduced hereunder: A) Long Term Capital Gain on sale of land shown at Rs. 39,72,484/- on sale of two parcels of agricultural land at Kaspi and Kanhalgaon. B) Kspi agricultural land acquired on 21/11/2003 and sol....