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2018 (12) TMI 1962
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.... M/s. NCL, which was claimed as exempt u/s. 10(38) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") as the sales transaction of such shares was subjected to Security Transaction Tax. According to AO, on perusal of the documents he noticed that the assessee had sold 72800 shares of Unno Industries Ltd. for a gross sale consideration of Rs.9,68,240/- through transactions on 07/03/2014. The history of it being, shares in the name of M/s Pinnacle Vintrade Ltd. were purchased by the assessee from M/s. Uniglory Developers Pvt. Ltd. numbering 80 @ Rs.1250/- per share for a sum of Rs.1,00,000/- on 24.01.2012. The company issued bonus shares @ 90:1 shares to the shareholders and the holding of the assessee was increased to 7200 shares. In later stage, the Pinnacle Vintrade Limited was merged with Unno Industries Ltd. and the shareholders of Pinnacle Vintrade Ltd. got 10 shares of Unno Industries Ltd. for each shares held by them. It was also noticed by the AO that the assessee had sold 2780 shares of NCL for a gross sale consideration of Rs. 40,64,609/- through transactions on 02/07/2013, 04/07/2013, 08-08-2013, 12-08-2013 and 07-03-2014. The said 2780 shares of M/s. NC....
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....r own fund from unknown sources to a legitimate form of income. Hence, according to AO, the claim of the assessee in respect of exempt income under the head LTCG is a bogus claim and therefore, a sum of Rs.46,83,790/- being gross sale consideration of shares as credited in the books of the assessee was added back by the AO to the total income of the assessee under the head undisclosed income. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of the AO. Aggrieved, assessee has preferred this appeal before us. 4. We have heard rival submissions and gone through the facts and circumstances of the case. The Ld AR submitted that the assessee sold her shares in M/s. NCL Research & Financial Services Ltd. and that of M/s. Unno Industries Ltd. in the previous financial year relevant to the assessment year under consideration and claimed it as exempt income u/s. 10(38) of the Act which has not been accepted by the AO and the Ld. CIT(A). The Ld. AR drew our attention to the fact that similar action was taken by the AO/Ld. CIT(A) in respect of Long Term Capital Gain on sale of shares of M/s. NCL Research & Financial Services Ltd. and M/s Unno Industrie....
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.... the relavent supporting evidences viz. purchase bill, registered broker's contact note/bill, D-mat statement and bank statement etc. were filed. It was brought to the notice of the AO that all the transactions were made through bank account. However, the AO referring to the report by DGIT(Inv) and taking note of the unusual high price rise of the scrips did not accept the share transactions as genuine, and held that the share transactions as bogus and added the total sales consideration of Rs. 46,83,790/- to the income of the assessee denying the clam of the assessee that income is exempt. On appeal, the Ld. CIT(A) confirmed the order of the AO. 7. We note that that during the previous year relevant to assessment year 2012-13 the assessee on 28-03-2012 & 29-03-2012 purchased 3000 equity shares of M/s. NCL Research and Financial services Ltd. (page 8&9 of paper book) through registered broker of Bombay Stock Exchange ( pages 8 to 18 of paper book). Later, 2350 shares were sold during the year resulting into long term capital gain of Rs. 38,19,923/-. Another long term capital gain of Rs. 8,63,866/- was earned during the year on sale of shares of M/s. Uno Industries Ltd. The f....
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....ate benches of this Tribunal recent decisions have accepted the claim of the assessee in similar facts when assessee has supported its claim with evidence supporting the claims as done by the assessee in this case. We note that in Dolarrai Hemani vs. ITO (ITA No. 19/Kol/2014)(AY 2005-06) (Dt. 02.12.2016), wherein it has been observed in similar case by the Tribunal as under: - " We find that the similar issue had been adjudicated by the co-ordinate bench of this tribunal in the case of Deputy Commissioner of Income-Tax vs Sunita Khemka in ITA Nos. 714 to 718/Ko112011 dated 28.10.2015 and in the case of Income-Tax Officer vs Raj kumar Agarwal in ITA No. 1330 (Kol) of 2007 dated 10.08.2007 wherein it was held that when purchase and sale of shares were supported by proper contract notes, deliveries of shares were received through de-mat 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 basi....
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....ee's action exposing her involvement in the scam should be brought out/unearthed. The allegation of AO implies that cash was paid by the assessee and in return the assessee received LTCG by way of cheque through Banking channels, which is income exempt from income tax. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation's office by way of unknown parties statements recorded which admittedly has been recorded behind the back of the assessee has been relied upon by the revenue to make any additions. When such actions are carried out, the AO has to ensure to give copies of the adverse material/statement given to the assessee and allowed the assessee an opportunity of cross examination, if the AO is going to rely on any adverse statements of third party as evidence to draw adverse inference against the assessee. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified evidence under the pretentious garb of preponderance of human probabilities and theory of ....
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....g is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing as against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, in our view, the Assessing Officer at best could have considered the investigation report as a starting point of investigation. The report only informed the assessing officer that some persons may have misused the scrip for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry from all concerned parties relating to the transaction and then to collect evidences that the transaction entered into by the assessee was ....
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....according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the Income-tax Officer was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 1,000 each". 17. The observations of the Hon'ble Apex Court are equally applicable to the case of the assessee. In our view, the assessing officer having failed to bring on record any material to prove that the transaction of the assessee was a collusive transaction could not have rejected the evidences submitted by the assessee. In fact, in this case nothing has been found against the assessee with aid of any direct evidences or ....
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....ainst the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross-examination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009SC 1100, this Court held: Effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for cross-examination or similar situation. The High Court in its impugned judgment proceeded to co....
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.... the Appellant wanted to cross-examine those dealers and what extraction the Appellant wanted from them. 6. As mentioned above, the Appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005[2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. In view the ....
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....urmises without any cogent material to controvert the evidence filed by the assessee in support of the claim. Further, the AO has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account." c)The Hon'ble Punjab and Haryana High Court in the case of PREMPAL GANDHI[ITA- 95-2017(O&M)] dated18.01.2018 at vide Page 3 Para 4 held as under: "..... The Assessing Officer in both the cases added the appreciation to the assessee's' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee's' income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in....
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....een duly considered by us to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT (A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT (A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition." e) The BENCH "D" OF KOLKATA ITAT in the case of KIRAN KOTHARI HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 held vide Para 9.3 held as under: "........ We find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At t....
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....g in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee's claim of exemption under section 10(38) ofthe Act." g) The BENCH "H"OF MUMBAIITAT in the caseof ARVINDKUMAR JAINHUF[ITA No.4682/Mum/2014]order dated 18.09.2017 held as under vide Page 6 Para 8: "......We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT (A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or....
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....nk." j) The Hon'ble Supreme Court in the case of PCIT vs. Teju Rohit kumar Kapadia order dated 04.05.2018 upheld the following proposition of law laid down by the Hon'ble Gujrat High Court as under: " It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises." 20. We note in the present case that the AO did not find any fault/infirmity in the document/supporting evidences filed by the assessee to substantiate its claim. The documents filed by the assessee are records of the transaction which happened in the platform of SEBI authorized Stock Exchange, which was carried out through authorized broker of Bombay Stock Exchange of scrips which were held in Demat account and consideration ris....
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....ction deprived other market players from full participation. The repeated reversals and predetermined arrangement to book profits and losses respectively made it clear that parties were not trading in normal sense and ordinary course. The Hon'ble Supreme Court found that by synchronization and rapid reverse trade done by traders, the price discovery itself was affected. It was also found as a matter of fact that except the parties who have pre-fixed the price, nobody was in a position to participate in the trade. Thus Hon'ble Supreme Court held that these facts had an impact on the fairness, integrity and transparency of the stock market and these facts go on to show that traders indulged in the alleged transactions (specifically charged transactions spelled out by SEBI in those cases) tantamount, to violation of the regulations of the SEBI's (Prohibition of Fraudulent and unfair trade practice relating to Securities Market) in respect to traders therefore, in the aforesaid factual matrix, the traders were penalized. However, as stated earlier the decision of SAT to delete the penalty on the brokers was accepted by the Hon'ble Supreme Court, so we note that the charges levelled aga....