TaxTMI 
TaxTMI 
2022 (8) TMI 130
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....on account of LTCG of Rs.2,49,54,750/- on sale of shares of Bakra Pratisthan Ltd. 2) The assessee reserves right to add, alter and withdraw of any grounds of appeal." 3. Succinct facts are that during the course of assessment proceedings, it was noticed by the assessing officer that return of income filed by the assessee shown Exempted income to the tune of Rs.2,49,54,750/- on account of exempted long term capital gain on listed securities u/s 10(38) of the Act. Details of the same are as under: Name of the Company Sales Price/year Purchase Cost/year Transfer Expenses Exempt u/s.10(38) Bakra Pratisth an Limited 26454750 1500000 0 24954750 The assessing officer observed that trading done by the assessee in the scripts of Bakra Pratisthan Limited who has poor fundamentals and is not doing any significant business activities since its inception. Moreover, trading in the above mentioned scripts has been done by the assessee through a broker namely, Shri Ashok Kumar Kayan who has been found to be engaged in giving bogus LTCG entries by rigging of shares of scripts. Therefore, the assessing officer was of the view that transactions in these sc....
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....Bogus LTCG, Share Capital, unsecured loans etc. Statements had been recorded various times by the Investigation Wing wherein they accepted the same facts and thus, proved as Entry Providers. A survey action u/s.133A of the I.T. Act, 1961 was carried in the case of broker of the assessee, Shri Ashok Kumar Kayan, at Kolkata in his office. During survey proceedings Shri Ashok Kumar Kayan has accepted that he and his business concerns are engaged in providing bogus LTCG entries to a large no of clients through a syndicate of brokers and entry operators. Statement of Shri Harshvardhan Kayan son of Shri Ashok Kumar Kayan was also recorded under section 133A for the Act on 27.1.2015 wherein he had also accepted that they provided bogus LTCG entries through Bakra Prathisthan listed at Kolkata Stock Exchange with the help of Shri Sunil Dokania, controller/manager of scripts. The assessing officer noted that said shares of Bakra Prathisthan were heavily used in providing bogus LTCG entries through market price manipulation mainly by Mr Ashok Kayan and his various allies. The said person was detected by the investigation wing Kolkata as a bogus entry provider and his statement has been record....
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....eal before us. 8. The Ld. Counsel for the assessee submitted written submission before the Bench, which is reproduced below: "1) The learned DCIT had made additions of Rs. 2,49,54,750/- disallowing the claim of exemption in respect of sale of shares of the listed company viz. Bakra Pratisthan Ltd merely because Shri Ashokkumar Kayan, the approved broker of Calcutta Stock Exchange had given statement u/s 131 of the Act on 27.01.2015 during the proceedings u/s. 133A of the Act admitting having involved in providing long term capital gain on shares of the said company. 2) The learned DCIT also observed that the said Ashokkumar Kayan, approved broker and member of Calcutta Stock Exchange was involved in providing long term capital gain with the help of one Shri Sunil Dokani and in response to notice u/s. 133 (6) of the Act which was issued in the assessment proceedings, the Ashokkumar Kayan had reiterated his statement which was given by him before the Investigation Wing, Kolkata. Regarding purchase of shares 3) The assessee strongly urges that he had originally purchased shares of Dhanlabh Merchandise Ltd and Twinkle Merchants Ltd from other part....
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.... in providing long term capital gain to Shri Naresh Shah in 2012-13. 1) The assessee further urges that he had not done any transactions through his son Harshvardhan Kayan and the alleged helper Shri Sunil Dokani. 12) The assessee strongly urges that, Shri Ashokumar Kayan also gave details in the form of annexure "A" which contains details of alleged beneficiary to whom long term capital gain was provided and in that list, the name of Mr. Naresh Shah is not included. Cross examination not allowed 13) The assessee strongly urges that he had requested to cross examine the said Ashokkumar Kayan and no cross examination was allowed and, therefore, his statement has no evidential value in this case as held by the Apex Court in the case of Kishanchand Chelaram V/s. CIT(125 ITR 713)(SC). Reliance on statement of Mr. Harshvardhan Kavan recorded U/s. 133A of the Act on 28-01-2015 14) The learned ACIT, grossly erred in relying upon the statement of Mr. Harshvardhan Kayan, S/O Ashokumar Kayan recorded on 28-01-2015 u/s. 133A of the Act. The assessee strongly urges that he had not done any transactions through Harshvardhan Kayan. The assess....
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....e assessee strongly urges that, many a times, there is boom in the prices of listed companies and merely because the prices of listed company was shut-up within a short period, the addition is not justified. 18) The assessee strongly urges that there is absolutely no evidence as to earning of undisclosed income and giving unaccounted cash to Ashokkumar Kayan in lieu of selling shares of Bakra Pratisthan Ltd through him. 19) The assessee had also purchased shares of several other listed companies and he was in the habit of investing monies in the shares. 20) The assessee strongly relies on the decision of Hon'ble Gujarat High Court in the case of Pankaj Enca V/s. CIT (Tax Appeal No. 976 of 2015). The assessee strongly urges that, even if the entry operator or any third party admitted in the business of providing entries, no addition is justified merely on the base of such statement unless an opportunity to cross examine is available. 21) The assessee relies on decision of Hon'ble CIT (A), Central Circle in his own case in the A. Y. 2012-13, Appeal No. CAS-4/631/2015-16 dated 20.06.2016 wherein the identical issue was involved and the addit....
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....had sold the same on two days being on 12.03.2004 and 25.03.2004 @ Rs.184/- and Rs. 314/- per share respectively. It was the submission that consequently the assessee had disclosed Long Term CapitalGain. It was the submission that the assessing officer had in the course of assessment observed that the broker who was the member of Stock Exchange through whom the shares have been transacted have been suspended by CSE and SEBI for share manipulation. Consequently, the assessing officer had treated the gains disclosed by the assesee as LTCG as unexplained cash credit. It was the submission that on appeal, the Ld. CIT(A) had directed the assessing officer to treat the profit out of the sale proceeds in the share transactions as LTCG by following the decision of the Coordinate Bench of this Tribunal in the case of DCIT Vs. Jagdish Prasad Goel (HUF) in ITA Nos. 541 & 542/K/2010 for AY 2005-06 as also the decision of Hon'ble Calcutta High Court in the case of CIT Vs. Bhagwati Prasad Agarwal in ITA No. 22 of 2009 dated 29.04.2009. It was the submission that the transactions were fraudulent and the order of the CIT(A) was liable to be reversed. 6. In reply, the Ld. AR submitted that....
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....e has substantiated his case for purchase and sale of shares with the necessary documents, we are of the view that the finding of the Ld. CIT(A) on this issue is on a right footing and does not call for any interference. 8. In the result, appeal of revenue is dismissed." 10. Therefore, Ld. Counsel contended that the scrip of M/s Bakra Prastisthan Ltd. was considered as a genuine scrip and therefore the Tribunal has deleted the addition. Hence, Ld. Counsel contended that addition made by the Assessing Officer is not justified and may be deleted. 11. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that solitary grievance of the assessee is the addition of Rs.2,49,54,750/- made by the assessing officer considering long term capital gain (LTCG) as non-genuine. The assessee has declared long term capital gain (LTCG) of Rs.2,49,54,750/-on sale of shares of Bakra Pratisthan Ltd. (BPL). The assessee originally purchased shares of Dh....
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....ened. Therefore, merely because in certain cases, appeals were preferred within the relevant time enabling, those assessees to avail the benefit of the V.S.V. Scheme can in no manner advance the case of the assessees before us. As has been argued before us by the learned Senior Standing Counsels, in the chain of events, there are three main person who are involved, the first of which is the entry operator who is said to have managed the overall scam as the entry operator controls several paper companies which have been utilized for routing the cash. The operator is also in control of some penny stock companies whose shares are listed on recognized stock exchanges. It is true that "penny stock" is not an offensive word or comes with a stigma. Penny stock is a stock which trades at a relatively low prices and market capitals. These stocks are highly speculative and they are categorized as high risk stocks largely due to lack of liquidity. Furthermore, the shares of the penny stock are closely held as the general public is not interested in these stocks due to the poor financials of the listed companies. It is for such reasons the entry operators are said to have chosen these penny st....
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....s wholly incorrect and does not pertain to the assessee- Gupta Agarwal. We have gone through the memorandum of appeal as well as the substantial questions of law suggested by the revenue and find the same to be not relatable to the assessee. This is on account of non-application of mind both by the Income Tax Department as well as the Officers of the Ministry of Law and Justice. More often we have stated that due care and caution has to be taken when appeals are drafted and filed before this Court and this is not the first case which has come up before us where the pleadings were irrelevant to the facts of the case. However, the substantial questions of law suggested by the revenue is with regard to the correctness of the order of the Tribunal in interfering with the order of the CIT(A) who affirmed the order of the Assessing Officer making the addition under Section 68 of the Act. Furthermore, we have to note that more than 90 appeals were allowed by the Tribunal in a single order and the facts of the 89 assessees were not noted by the Tribunal. In any event, the assessee, Mr.Gupta was quite happy with the result and he made no attempt to request the Tribunal to note his facts whi....
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....h Court was to be dismissed - Held, yes [Para 1] [In favour of revenue]" 13. Based on the facts and circumstances, as narrated above, we do not find any infirmity in the order of ld CIT(A). The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the cross objection of the assessee. 14. In the result, Cross Objection filed by the assessee in CO.No.16/SRT/2021, are dismissed. 15. Now, we shall take Revenue's appeal in ITA No.197/SRT//2020 for AY.2012-13 wherein grounds of appeal raised by the Revenue are as follows: "1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.12,14,13,015/- (after rectification u/s 154 of the Act, which originally was of Rs.13,75,13,015/-) made on account of unexplained cash credits u/s 68 of the I.T. Act without appreciating the fact that one of the directors of the company M/s GCSL had admitted on oath in the statement recorded u/s 131 of the I.T. Act that he had provided accommodation entries for loans and advances by providing cheques in lieu of cash received from Shri....
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.... under As on 31.03.2012 1 NARESH NEMCHAND SHAH ACRPS0182J "Abhishek House", Nr. JeevanBharti School, Kadampalli Road, Nanpura, Surat Rs.13,75,13,015/- The ledger copies of Shri Naresh Nemchand Shah in the books of M/s. Gujarat Computer and Software Limited established these facts. Therefore you are required to show cause as to why the amount of Rs.13,75,13,015/- received from the above mentioned parties during the year should not be treated as unexplained cash credit u/s.68 of the Income Tax Act, 1961 and be added to your total income for A.Y.2012- 13." 17. In response to the show cause notice, the assessee has furnished his reply to the Assessing Officer. The relevant portion of the reply is reproduced below: "4.1 Your Goodself has proposed to make an addition of Rs.13,75,13,015/- u/s. 68 of the Act being the amount of loans received from Gujarat Computer & Software ltd. the addition is proposed merely because one of the Director Tamaal Roy admitted in his statement u/s 131 of the Act during the survey action u/s 133A of the Act, the transactions as accommodation entries. 4.2 It is submitted that various documents relating to the loan f....
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....early stated the name of the assessee as beneficiary as, mentioned by the assessing officer on page no.13 and 14 of the assessment order. The assessing officer summoned to Sri Tammal Roy during assessment proceedings for further statement, but he did not attend and re-iterated that statement given during the survey on 03.03.2016. Along with the letter dated 07.10.2017, Shri Tammal Roy enclosed the documents sought by the assessing officer showing transaction with Shri Naresh Shah, the assessee. On the basis of the statement of the Shri Tammal Roy during survey u/s 133A and his confirming the statement vide letter dated 07.10.2017, the assessing officer, made the additions to the tune of Rs. 12,14,13,015/- considering the loan obtained from GCSL as non-genuine. 19. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us. 20. Shri H. P. Meena, Learned CIT(DR) for the Revenue, argues that as per statements investigation was going on in respect of huge payment of Rs.119/- crores to M/s HAH Global Enterprise & Services ....
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..... Act. The ld Counsel also relied on several judgements of Hon'ble jurisdictional High court of Gujarat. The ld Counsel also states that complete amount of loan has been repaid in subsequent years through regular banking channel. Therefore, ld Counsel contended that ld CIT(A) has rightly deleted the addition. 22. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that to prove the identity genuineness and creditworthiness of the loan, the assessee filed confirmation signed by the director of the company, copy of bank statement of creditor, copy of return of income of creditor, PAN number, Name and address and copy of audit report of creditor. All these documents were also filed by Shri Tammal Roy, director of the company before the assessing officer along with letter dated 07.10.2017, which confirm the contention of the assessees. The ld Counsel contended that Rs.l.61Crore is the opening balance and Rs.12,14,13,015/- is the correct amount of loan taken during the year. The assessing officer passed the order u/s 154 of the Act on bringing this mistake to notice. The ld Counsel argued ....
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....s of the creditor, the ld Counsel stated that creditor had turnover in A.Y. 2011-12 of Rs.8.56 Crores and Rs.35.25 Crores, in 2012-13. There is no cash deposit found in the bank account of the creditor, prior to the cheque issued to the assessee. Regarding genuineness of transaction, the ld Counsel stated that loan was received through regular banking channels, interest was regularly paid and TDS was deducted and deposited in government account as per the provision of the I.T. Act. We note that that if the transaction is through regular banking channels and creditor has confirmed the transactions, such transactions are genuine and therefore, addition made by the assessing officer are not sustainable. 25. The assessee also stated that complete amount of loan has been repaid in subsequent years through regular banking channel. There have been no adverse findings by the assessing officer in this respect. Hon'ble Gujarat High Court in the case of CIT Vs. Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj.), has held as under: "...it has also come on record that the said loan amounts been repaid by the assessee in the immediate next financial year and the Departm....
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....he transaction is confirmed by the creditor and transaction is through regular banking channel, additions u/s 68 are not justified. Further, our view is fortified by the Judgment of Hon'ble High court of Gujarat, Ahmedabad in the case of DCIT vs. Rohini Builders (256) ITR 360 (Guj.) wherein it has been held that assessee has discharged onus u/s 68 on providing PAN and complete address of the creditor. In the assessee case, identity of the creditor is established beyond doubt by the department itself by conducting the survey u/s 133A of the Act. The assessee provided bank account of the creditor with audited accounts. 27. The ld CIT(A) noted that assessee paid interest through regular banking channels to the creditor. The TDS was deducted upon such interest payments and deposited in the government account. Moreover, the full loan amount was repaid through regular banking channels to the creditor in subsequent years. These facts further prove the genuineness of transactions beyond doubt. The ld Counsel submitted that statement recorded during the course of survey do not have evidentiary value, if these are not supported by some corroborative evidence. In the assessees case, ad....