TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1205
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....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 the business of selling land. viii. The Ld. CIT(A) erred in relying on a decision of the ....
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....tal 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 of assessee by deleting the addition made by A.O. on account of unexplained cash credit u/s. 68 of IT Act 1961. The asse....
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....n 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 aforesaid graph pasted in assessment order is at page 8. The aforesaid observation in the assessment order demonstrates that the aforesaid shares....
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.... 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 assesses and HUFs do not maintain their personal books of account. The transactions of purchase and/or sale of their shares are reflected in their bank accounts only. There are no cash....
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...."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 assessed by the Department as LTCG, the same information was given in the return filed u/s. 153A. The AO has not disputed the fact that income on account of Long Term Capital Gain was duly shown by the ....
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.... 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 assessee claims to be not in the nature of income. The provisions of sec. 68 cannot be invoked to a receipt which is already declared by assessee as income in its return of income. In view of above we hold that the provisions of sec. 68 of IT....
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....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 company in which appellant had derived long term capital gain. The Hon'ble ITAT had found no force in the submission of revenue and has recorded its finding at pages 33 to 36 which is reproduced hereunder for ready reference. The Revenue has also relied on the decisions of SEBI i....
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....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 contention raised by the revenue in these appeals is that the entire long term capital gains claimed by the assessee represent undisclosed income of the assessee because:- (a) most of the sales of the shares effected by the Group are of the same Companies and through the same Brokers located at Calcutta. (b) Pradeep Kumar ....
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....ce 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 on record. 14) The Tribunal has further recorded a finding of fact that the cash credits in the Bank Accounts of some of the buyers of shares cannot be linked to the assesses. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assesses were in conformity with the market price, the Tribunal recorded a finding of fact ....
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....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 squarely applies to the facts in case of appellant. Considering the ratio laid down by Hon'ble Bombay High Court addition made by AO in case of appellant is unjustified and unsustainable. 6.10 The various decisions of ITAT as given hereunder have held that transaction of sale of shares cannot be disputed or doubted on mere inferences. i)) Order ITA No. 1442/Ahd/2013 dated 06/01/2017 in the case of Shri....
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....mani 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 transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. We find that in the instant case, the addition has been made only on the basis of the suspicion that the difference in purchase and sale price of these shares is unusually high. The revenue had not brought any material on record to support its finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. 2.9.6. In view of the aforesaid facts and ....
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....dings 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 an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions." The perusal of facts of judgment....
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....uired 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 during period from December 2013 to January 2014 has sold shares of M/s. Out of City Travel Solutions Ltd. at Bombay Stock Exchange on screen based trading conducted through registered brokers at quoted rates. It is evident from contract note that STT is paid. Brokerage is charged. Service tax on brokerage is also charged. Transaction of assessee has been subjected to statutory levies. Time of trade and market rate is indicted. (Contract Notes Page 12 to 35) [Vol.-III] C) The details of documents on record to corroborate the transactions are as under:- i) Demat Account ii) Contract Note....
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....f 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 u/s. 260A of ITAT. The aforesaid appeals filed before Hon'ble Bombay High Court were decided by Hon'ble High Court vide judgment dated 23/09/2010 in consolidated order in Income Tax Appeal No. 41/2010. v) The Hon'ble High Court had also noted the contention of revenue that the broker had deposed that transaction before the Income Tax Department with Haldiram were bogus and modus operandi of the transaction was explained. The Hon'ble High Court after considering the submission as made before it has concluded that there is no merit in appeal of revenue and thus appeal filed by revenue was dismissed. vi) The aforesaid order of Hon'ble Bombay High Court was further challenged by rev....
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....urt 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 assessee is backed by corroborative evidence and is through proper banking channel. 11. We have considered the submission made by both the parties and perused the materials available on record. The Assessee in return of income had declared long term capital gain arising out of sale of shares of company M/s. Out of City Travel Solutions Ltd. The shares of aforesaid company are listed at Bombay Stock Exchange and were being regularly traded. The assessee had purchased 2 lacs shares of said company in preferential allotment during Asstt. Year 2013-14. Shares are received in Demat account and allotment letter of shares indicating lock in period of one year is placed on record. The investment in purchase of shares was duly recorded in books of account as investment in shares. In regular assessment framed u/s. 143(3) for Asstt. Year ....
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....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 brought any specific credible evidence on record which discredits the share transaction of assessee. Before us learned DR has not pointed out any evidence on record which discredits the transaction of shares of assessee. All documentary evidence placed on record clearly demonstrate genuineness of transaction of shares of assessee. 15. The Addition made by A.O. is by making observation about financial analysis of company and general information in stock market. None of documentary legal evidence placed on record by assessee substantiating sale of shares has been found to be false or incorrect. No shred of evidence is brought on record to discredit transaction of sale of shares of assessee. Thus addition made is unjustified. 16. Recent decision dated 15/01/2021 of Hon'ble Delhi High Court in the case of Smt. Krishna Devi in ITA No....
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.... 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. 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 eviden....
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....at 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 shares sold by the assesses 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 on record. 14) The Tribunal has further recorded a finding off act that the cash credits in the Bank Accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' Bank Accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. 15) Reliance placed by the C....
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....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 the addition made by A.O. The Ld. CIT(A) in his appellate order held as under: "9. I have considered the submission made by counsel of appellant and perused the evidence on record. In case of appellant 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. In Ground No. 1 to 3 I have discussed the issue as regard to long term capital gain on sale of shares and have concluded that the transaction in respect to sale of shares by the appellant is genuine and cannot be doubted. The A.O. bad made addition as according to him the transaction of sale of share was bogus. The very premises for which the addition is made has been held to be not correct and thus conseq....
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....t 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 is on A.O. to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no evidence of expenditure incurred by assessee, the question of any addition for the same does not survive. The addition made by A.O. is unjustified and unsustainable. We therefore hold that there is no case for making any addition u/s. 69C of Income Tax Act 1961 at the hands of assessee. Addition made by A.O. at Rs. 28,67,126/- has correctly been deleted by learned CIT(A). We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. We find no merit in the appeal of revenue and ground No. 6 of appeal of revenue is dismissed. 24. Ground No. 7 and 8 of appeal of revenue relates to challenging the order of CIT(A) treating sale of land as capital gain instead of business income The assessee has made written submission before L....
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....roduced 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 sold on 20/04/2013 has holding period of 9 1/2 years (Approximate). It is co-owned property by 2 co-owners. C) Kanhalgaon land acquired on 27/03/2008 and sold on 24/01/2014 has holding period of 6 years (Approximate). It is co-owned property by 6 co-owners. D) Co-owned property is indicative of fact that it is capital asset and not trading activity. It is not disputed that it is co-owned property. E) In books it is shown as investment. Agricultural income derived was declared as agricultural income. It was not acquired with intention to trade. Period of holding substantiate the submission made. F) Onus is on revenue to show that gain is in the nature of adventure in trade. Reliance on: i) (1988) 38 Taxman 102 (Bom) CIT vs. V.A. Trivedi (P- 48 - 58) (50 - 53) [Vol.-II] ii) ITAT order in ITA No.544/Pun/2018 in the case of M/s. Adrus Estate and Properties LLP vide order dated 05/07/2021. (P- 59 - 70) (65, 67, 68) [Vol.-II] iii) CBDT Circular No.6/2016 dated....