TaxTMI 
TaxTMI 
2022 (11) TMI 523
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the ITAT Delhi Bench dated 8.01.2019 which relates to subsequent year 2015-2016 and was not in existence when the AO passed the assessment order on 27.11.2017 and thereby the order setting aside the assessment order is bad in law and needs to be set-aside. 4. That the order of the PI CIT Chandigarh setting aside the order of assessment which has been passed consequent upon the reassessment proceedings initiated by the AO to verify the genuineness of the claim of the appellant with regard to the long term capital gain from the sale of shares of CCL International is bad in law and needs to be set aside. 5. That the PL CIT Chandigarh has erred in law in setting aside the order passed by the AO wherein issue pertaining to purchase and sale of the shares in question has been thoroughly examined and thrashed after due application of mind by the AO is bad in law and needs to be set-aside. 6. That the appellant craves leave to add, amend, delete any of the grounds of appeal at any time before the appeal is finally heard and decided." 2. The hearing in the present case took place on 4.07.2022 and 05.07.2022 and concluded on 07.07.2022. 3. However, before ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. 7. The assessee is aggrieved by the order and is in appeal before the ITAT. 8. The ld. AR Mr. M.R. Sharma appearing on behalf of the assessee submitted that the AO has passed a reasoned order after enquiring in detail on all these issues. Referring to the record, it was submitted that the AO was conscious of the scam in penny stock company cases and passed the order after making all possible enquiries from all sources on the issues and none of these evidences in the impugned order are shown to be incorrect. The case has been set aside by the ld. PCIT purely on suspicions relying on a case which has no applicability to the facts of the present case. The evidence on record considered by the AO, it was submitted, remains unrebutted. The ld. AR invited attention to the enquiries made by the AO in the course of hearing at the assessment stage. It was his submission that the AO in the order passed has extracted the reasons for resorting to proceedings u/s. 147. On a reading of the reasons extracted, it was submitted that the AO was well and fully aware that Directorate of Investigation had unearthed a large scale scam of bogus Long Term Capital Gain in penny stocks sales/purchas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned by the AO. It was submitted that the AO also considered the position of law as available in the case of assessee's mother Smt. Harjeet Kaur and assessee's father Shri Kanwaljeet Singh Toor who were also assessed at Delhi. The assessee's AO, it was submitted, enquired into the issue from the Assessing Officer at Delhi in the context of the findings of the DCIT (Investigation). The details of the purchase and sale rates, it was submitted, were all seen by the AO. This fact is evident from the office note available in the record of the Department itself. 8.3. It was clarified that 'NSE' inadvertently used by him while arguing and also recorded in the submissions etc. is an inadvertent mistake as it is not the case of the assessee that any transaction took place on the NSE. The shares, it was submitted, were traded only on the 'BSE' and the assessee whenever by mistake has used NSE means to say that it was traded on the Stock Exchange which is BSE. Thus, the inadvertent user of NSE may be understood to mean BSE the relevant Stock Exchange and not NSE. This mistake, it was submitted, has occurred many times where instead of 'BSE' reference is m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee at Paper Book page 164 to 168 of the Paper Book also heavily relied upon by the ld. AR to canvass that the order was passed after due enquiries with full awareness of the seriousness of the issue is also extracted hereunder for completeness: In this case information has been received from the Directorate of Income Tax (Investigation) Kolkata that large scale tax evasion in the form of bogus long term capital gain claimed by various beneficiaries through the use of penny stocks being sold/purchases to facilitate these transaction. It has come to notice that Sh. Trivikram Singh Toor has taken benefit of bogus long term capital gain by using scripts of penny stock name CCL International during F.Y. 2012-13 i.e. A.Y. 2013-14. The assessee has sold 750000 shares of CCL international Ltd. for an amount of Rs. 9,90,89,257/-. This was a sham transaction in which unaccounted cash was routed back via layers of broker and entry operators. The assessee declared income form house property at Rs. 13,24,753/- and income from other sources at Rs. 12,03,000/-. The assessee filed a revised return declaring income of Rs. 1,47,00,760/-. In the revised return inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... He also filed written submission. The report of the Inspector along with the copies of the Statement and written submission of Sh. Devesh Upadhay are placed on record. Sh. Devesh Upadhay denied knowing assessee but he admitted providing accommodation entries to M/s. CCL International Ltd. through his following five concerns:- i. Sinjan Infrastructure Ltd. ii. Sinjan Food and Beverages Ltd. iii. Sinjan Equities Pvt. Ltd. iv. Sinjan Developers Pvt. Ltd. v. Sinjan Realtors Pvt. Ltd. He however denied knowing the assessee directly or indirectly. Name of all such buyers of the shares of M/s. CCL International Ltd. who have been taken out from the ITD Systems. List is enclosed. None of the buyers of the shares of CCL International sold by the assessee is matching with the list of concerns mentioned by Sh. Devesh Upadhay through which he provided accommodation entries to CCL International. Independent inquiries and submissions of the assessee have further revealed that M/s. CCL International is a reputed company which is regularly traded on BSE since last so many years and thus it does not fall under the category of "Penny S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ock is available with the Department. All evidences suggest that the stock of M/s. CCL International is not a "Penny Stock". In fact, if we see the daily movement of the stock in 2012-13 then it is evident that there are no sharp peaks or volatility and daily prices are quite even. The term "Penny Stock" is used for those stocks where the value of stock is extremely low so that its prices can be manipulated by artificially raising its price for a short period. These companies are paper/shell Companies with no business. By no stretch of imagination M/s. CCL International Ltd. can be clubbed in this category. The above comments have also been forwarded to the DDIT (Inv.) vide letter dated 28.03.2016. Since no reply has been received till 31.03.2016 hence this order is being passed without drawing any adverse inference. However, if any adverse information is received in future then appropriate remedial measures may be taken. The option of taking remedial measures is kept open as no "clean chit" has been given to the assessee in the assessment order. It has also been noted that the DDIT (Inv.), Patiala, has also recommended Search or Survey operation in case of M/s. C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....algamation has attained finality. If, subsequently any adverse information is received in the case of trading of share of M/s. CCL International then the case of the assessee can be reopened accordingly. This case has been decided after discussion with the Addl. CIT, Range-6, Mohali from time to time." 8.6. Heavily relying upon the office note which was obtained by the assessee under RTI it was submitted that the AO after carrying out due enquiries and looking at all the documents and evidences available on record passed the order conscious of the fact that there was a n allegation of the Directorate of Investigation, Calcutta that there was a scam of bogus Long Term Capital Gain indulged into by some parties in the sale of share of M/s. CCL International Ltd. 8.7. It was submitted that not only the reasons recorded in the assessment order bring out this fact but the detailed office note further clarifies that the AO of the assessee followed up with the AO at Delhi wherein similar claims in regard to the father and mother of the present assessee i.e. Shri Kanwaljeet Singh Toor and Smt. Harjeet Kaur Toor for the very same assessment year on the very same allegation were being ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....td. wherein the assessee was allotted 750000 equity shares at a certain price in lieu of certain trading shares valued at Rs. 10/- each of M/s. AAR Infrastructure. The office note, it was submitted, takes note of the fact that the amalgamation had been effected vide order dated 09.02.2012 of the Hon'ble Delhi High Court and no SLP against the said order of the Delhi High Court had been filed by any person or any agencies like SEBI or Income Tax Department. Accordingly, it was concluded that the issue had attained finality. It was emphasized that it has been noted that no evidence of the manipulation of stock of M/s. CCL International Ltd. was available on record and even on the date of the office note, stock was being traded at Rs. 96/- per share despite the fact that the entire stock market was in a bearish phase. Considering the price for the specific period, it was concluded that there is no stock manipulation and there was no information of any enquiry conducted by SEBI regarding manipulation of stock and infact M/s. CCL International Ltd. had declared a dividend during the period and assessee had disclosed receipt of Rs. 36000/-. Thus, on the basis of these facts consideri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of manipulation etc. in trading in penny stock company, the AO finally concluded that keeping in view the facts of the case of the assessee that case of the assessee is not of penny stock and held it to be a case of genuine transaction of share trading. Reading from the record, it was submitted, that accordingly, the facts were summed up by the AO in the office note as under: "The assessee has made investment of Rs. 30 Lac on 07.03.2011 in purchase of shares of JVtys AAR Infrastructure. The assessee has been allotted Rs. 3 lac shares of M/s. AAR Infrastructure. Subsequently AAR Infrastructure was amalgamated with M/s. CCL International Pvt. Ltd. on 09.02.2012 with the order of the Hon'ble Delhi High Court that order of Delhi High Court has not been objected by any of the competent authority. Thus the order of the Hon'ble Delhi High Court of amalgamation has attained finality. If, subsequently any adverse information is received in the case of trading of share of M/s. CCL International then the case of the assessee can be reopened accordingly. This case has been decided after discussion with the Addl. CIT, Range-6, Mohali from time to time." 9. In the said backgr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Income Tax Act, 1961." 9.1. Reading from the said Show Cause Notice, it was submitted that 263 proceedings have been initiated on the basis of the order of the ITAT dated 08.01.2019 in the case of Shri Anip Rastogi and Smt. Anju Rastogi as clearly mentioned in the Show Cause Notice. Inviting attention to the assessment order dated 27.11.2016 it was submitted, that the order of the ITAT in the case of Shri Anip Rastogi and others dated 08.01.2019 was not available to the AO and accordingly, since it was not part of the record of the AO, the exercise of Revisionary power u/s. 263 by the ld. PCIT in the circumstances was contrary to law as while exercising the powers u/s. 263, the ld. PCIT is to consider the record as available to the AO. 9.2. Addressing the aforesaid Show Cause Notice, it was submitted that the reasons set out in (i) and (ii) of the same were conjectures and surmises the facts more or less stood considered in the assessment order and these observations do not detract from the fact that allegation of penny stock already stood investigated, enquired into and considered in detail by the AO before the passing of the order. Thus, it was argued that this is anothe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mphasize that it has been argued that the Show Cause Notice is based entirely on surmises, conjectures and suspicions and no infirmity in the detailed information available on record has been pointed out. The sequence of dates in regard to the filing of the return and the notices issued; and the reasons for re-opening; the factum of DDIT (Investigation) Calcutta; allegations of Long Term Capital Gain on the sale of 750000 shares of M/s. CCL International Ltd. were all addressed. Specific emphasis was laid on the detailed replies extracted in the order in para 5 sub-para (i) (ii) and (iii) reproduced as under: 5. That the assessee during their assessment proceedings vide his reply dated 20.09.2017 submitted as under:- That the perusal of the record would reveal that the above noted assessee paid an amount of Rs. 30,00,000/- vide Cheque No. 281886 dated 07.03.2011 towards the purchase of 3,00,000 shares of company named and styled as AAR Infrastructure. The amount has been withdrawn from the Account No. 00561000197723 with the HDFC Bank. A copy of the bank account has already been furnished. 2. That the perusal of the record would reveal that the company na....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) of the Income Tax Act. This claim has been made by the assessee by filing the return of income for the year under consideration. The perusal of the copy of account of the assessee with regard to the purchase and sale of shares would reveal that these shares were sold by the assessee through the Master Capital Services Ltd. with whom the above noted assessee was maintaining the purchase and sale account. A copy of the account for the period from -1.03.2011 to 31.03.2013 is being enclosed for your perusal and record. This contains the details with regard to the each sale is again being appended for your perusal and record along with the computation chart. The perusal of this would further reveal that sale bills for the sale of shares have duly been issued and STT has been charged in the said bills. It is also evident from the perusal of the said account that the shares which has been sold were sold at rates which were there on the BSE. I am also enclosing herewith following documents for your perusal/record and verification:- (i) Copy of allotment letter dated 07.03.2011 issued by AAR Infrastructure Ltd. showing the total number of shares at 3,00,000 and having total value....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en paid in cash. Thus it is evident that all the sale proceeds of the shares v/ere credited to the account of the assessee with the Master Capital Services Ltd. A copy of which is being enclosed and the payments from the said account through 24 various cheques were made by the Master Capital Services to the above noted assessee during the period from 26.06.2012 to 09.11.2012. A copy of the said account maintained with the capital services as well as the copy of Saving Bank Account of the assessee with the HDFC Bank as per details in para-4 above is being enclosed for your perusal and record. Regarding the purchase and sales of shares during the period prior to the year under consideration it is submitted that no purchases or sales of shares were undertaken by the above noted assessee. 9.5. Specific attention was also invited to the arguments on facts as canvassed before the ld. PCIT extracted at page 8 and 9. Heavy reliance was placed on the arguments and evidences relied upon before the ld. PCIT and the AO to show that the Revisionary powers were wrongly exercised. For the sake of completeness, these are reproduced hereunder: "I am also enclosing herewith a copy of let....
X X X X Extracts X X X X
X X X X Extracts X X X X
....given in the computation chart filed by the above noted assessee. As regards the rental income the details of the properties from where the rental income of Rs. 1324753/- after deducting the expenses @30% towards the repair has been received by the above noted is given in the computation chart being enclosed herewith. The property at Pabhat was purchased through a sale deed dated 11-03-2008. A copy of the purchase deed is being enclosed. As regards the other property from where the rental income has been received by the assessee situated in Ambala the said property was purchased by the above noted assessee through a sale deed dated 22.08.2007. A copy of the sale deed is being enclosed for your perusal and record. The requisite details of the income as shown by the above noted assessee are appended in the computation chart. The difference in the original return filed and the return filed in response to the notice u/s. 148 is due to non availability of the TDS and other details. With regard to the income of Rs. 12282998/- the said income is from speculation business as shown in the computation chart filed by the above noted assessee. In view of the nature of the business of the no bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orm for the income is being enclosed for your perusal and record. 16. That details of the land holding and its purchase deeds have been filed in reply to para 11 above. 17. That with regard to the said long term, capital gain are given in the computation chart. The above noted assessee was allotted 300000 shares by M/s. AAR Infrastructure Ltd. vide its letter dated 7-03-2011. The face value of these shares was Rs. 10/- per share. The said price of the shares was paid at Rs. 30,00,000/- by the above noted assessee vide cheque vide Cheque No. 281886 dated 07.03.2011 and the proceeds of the said cheque were paid from the SB A/c No. 00561000197723 with the HDFC Bank. A copy of the bank account is being enclosed for your perusal and record. The shares so allotted were existing in the D-MAT account IDL1083 maintained with Master Capital Services by the above noted assessee. A copy of account is also being enclosed for your perusal and record. It is submitted that the said company was amalgamated with another company named and styled as M/s. CCL International as per the orders passed to that effect by the Hon'ble Delhi High Court. A copy of the order is being enclose....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h TDS stood deducted. Addressing the facts of the assessee's case and the position of law as available in the public domain, it was submitted, was also brought to the notice of PCIT. Specific attention was invited to the reply extracted in the impugned order at page 15 para 9 on which heavy reliance was being placed in the present proceedings also. It is extracted hereunder for completeness: "9. That I have already filed the details of the purchase of the shares along with the details with regard to amalgamation orders of the High Court as well as the conversion of the shares and entries in the D-mat account of the assessee the copies of which I have already filed during the earlier hearing. I have also filed copies of the sale bills and the copy of the bank account in which the sale proceeds of shares has been transferred. The perusal of the record would also reveal that there is no cash transaction either at the time of purchase or at the time of sale of the shares under consideration. The banking transaction when taken cannot in any manner be termed as penny stocks. It is submitted that the sales of shares has taken place a number of time and at various rates as per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt records and these had been addressed by the assessee in the details already extracted in the earlier part of the impugned order. It was his submission that the ld. PCIT is trying to relook at the very same information and this is an effort to set aside a validly passed assessment order purely on conjectures and surmises. For ready reference, para 3.1 from page 28 is extracted hereunder to argue that all these details available to the AO made available to the ld. PCIT were again required to be filed: 3.1 In response vide order sheet entry dated 02-02-2021, the counsel of the Assessee was asked to produce the following document/information:- i) Date of opening of DMA T account. ii) Copy of bank account from where shares were purchased. iii) How were the shares purchased, directly or through broker. iv) Order of High Court v) Share transaction entered into by the assessee before this date. vi) Why is the name of the share not appearing in the DMAT account. vii) Copies of invoices for purchase and sale. The case was adjourned for 05/02/2021." 9.9. The reply of the assessee in para 4 from page 28 to 30 again e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat there was no reason to justify the steep rise in the share price of the company after amalgamation and speculates that share price was rigged. The said speculation and suspicion, it was argued has no evidence or basis and is purely whimsical. It was his submission that ld. PCIT also goes on to speculate that it is penny stock company, discusses the decisions in various cases which have no bearing on the facts of the present case. These decisions, it was submitted, are not similar to the facts of assessee's case. Relying on decisions inapplicable to assessee's case based on suspicions, it was submitted, does not justify that 263 action was warranted. The conclusion in para 22 that there was failure of the AO to make enquiries/verification to arrive at correct and complete facts and to apply the correct law and thus, this makes assessment order erroneous and prejudicial to the interests of the revenue was strongly assailed as being based purely on suspicions. 9.11. It was his vehement submission that the entire exercise is an exercise to relook at the very same information and apart from suspicions, no error has been pointed out by the ld. PCIT to justify the action. S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the record. The requisite documents e-mailed and permission sought for initiating proceedings u/s. 147 were all referred to. 10.2. Copy of the reply in response to the notice issued at pages 13 and 14 from pages 15 to 54 on 12.02.2017 and 16.10.2017 including the copy of questionnaire and its reply with enclosure referring to S. No. 3 were heavily relied upon. Inviting specific attention to the query raised by the AO on 16.08.2017 at pages 15 to 17, specific attention was invited to Sr. No. 4 which required the assessee to provide copy of D-Mat statements for the period 01.04.2009 to 31.03.2013 in share trading done either by the assessee or any dependant family member. 10.3. Attention was invited to the query raised at Sr. No. 5 which required the assessee to provide list of share brokers through whom share trading for this share and during the specific period had been done. Attention was invited to question No. 6 at page 16 to show that the assessee was required to provide the details of all the long term capital gain that has been earned by the assessee and his family members since 01.04.2009. Attention was invited to question No. 7 at page 16 to provide the list of all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The face value of these shares was Rs. 10/- per share. The said price of the shares was paid at Rs. 30,00,000/- by the above noted assessee vide cheque vide Cheque No. 281886 dated 07.03.2011 and the proceeds of the said cheque were paid from the SB A/c No. 00561000197723 with the HDFC Bank. A copy of the bank account is being enclosed for your perusal and record. The shares so allotted were existing in the D-MAT account IDL1083 maintained with Master Capital Services by the above noted assessee. A copy of account is also being enclosed for your perusal and record. It is submitted that the said company was amalgamated with another company named and styled as M/s. CCL International as per the orders passed to that effect by the Hon'ble Delhi High Court. A copy of the order is being enclosed for your perusal and record. It is submitted that from the perusal of the D-Mat account maintained by the above noted assessee a copy of which has been filed that the assessee was allotted 750000 shares of M/s. CCL International Ltd. after amalgamation order passed by the Hon'ble Delhi High Court dated 9-02-2012. It is also submitted that as per the record the value of the said share was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... purchase of shares on 07.03.2011 and the value of 7,50,000 shares of the amalgamated company, which was equal to the 3,00,000 shares of the AAR Infrastructure Company. Thus the cost of acquisition of 7,50,000 shares of the amalgamated company for the assessee works out to Rs. 30,00,000/-. As regards the sale of the shares of the amalgamated company the same has taken place during the period from 26.06.2012 to 17.11.2012. It is also evident from the perusal of the record that the sale of shares of the Amalgamated company which were listed with the National Stock Exchange were sold by the above noted assessee through its brokers known as master capital services limited. The assessee has duly disclosed the long term capital gain arising from the sale of the said shares of the amalgamated company while filing the return of income for the year under consideration. I am also enclosing herewith a copy of the letter dated 24.03.2012 issued by the CCL International Ltd. the perusal of which would reveal and confirm the facts mentioned above. Thus it is clear that the investment for all intents and purposes was made by the assessee for the purchase of shares on 07.03.2011 which were sold af....
X X X X Extracts X X X X
X X X X Extracts X X X X
....28.09.2011 land the appointed date for the amalgamation was 1.04.2011 and the order of amalgamation was passed on 9.02.2012. The date of issue of the shares of the original company was 7.03.2011. The law laid down various courts has held that in the case of amalgamation of the company as per the provision of the companies Act there is no transfer of the shares held in the original company and as such the period of acquisition of the shares do not change and thus remains at 7.03.2011. (iii) A copy of the ledger account with Master Capital Services. A copy of the ledger account in the books of Master Capital Service Ltd. is being enclosed for your perusal and record. The perusal of this would reveal that on 24.03.2012 there was a converted balance of 750000/- shares of CCL against 3,00,000 shares of M/s. AAR Infrastructure Ltd. Further perusal of the same would reveal that against the said opening balance on the date of amalgamation i.e. 20.06.2012 the said shares were amalgamated and new shares numbering 7,50,000 of the CCL International Ltd. were shown as opening balance in the books of the Master Capital Services Ltd. Further perusal of the same would reveal that the firs....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by making the payment through cheque and the first sale of the shares has taken place on 26.06.2012 as is evident from the perusal of the sale account maintained by the assessee with Master Capital Services Ltd. is beyond the period of 12 months and hence qualifies are exemption under the provision of section 10(38) of the Income Tax Act. As regards the cost of acquisition of the shares the same has been taken at Rs. 30,00,000/- only being the Cost of acquisition of the shares. Thus as per the provisions of the Income Tax Act as mentioned above the assessee is entitle to the exemption as has been claimed in the return of income filed. That I am enclosing herewith a copy of the computation chart of income for the year under consideration for your perusal and record. I am also enclosing herewith a copy of the financial statement for the year ended on 31.03.2013 issued by the Master Capital Services Ltd. indicating there in the sales of shares and the payment made to the above noted assessee. I am also enclosing herewith copy of details containing the sales of shares during the year under consideration issued by Master Capital Service Ltd. showing the global bills date wise and settl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Bombay High Court in the case of CIT Vs Shri Mukesh Ratilal Marolia (IT Appeal No. 456 of 2007). Copy of the said decision is available at pages 35 to 38. It was his submission that before the AO, the assessee had also relied upon the decision of the Hon'ble Calcutta High Court in the case of CIT Vs Korlay Trading Co. Ltd. 232 ITR 820 (Cal), copy of the said decision, it was submitted, is placed at page 39 to 42. Inviting attention to pages 43-44, it was his submission that the assessee had placed reliance on these decisions with the covering letter dated 10.10.2017. Contents of the said letter are heavily relied upon. For the sake of completeness, these are reproduced hereunder: "Subject:- Assessment proceedings 148/143(3) of the Income Tax Act, 1961-Requisition of information u/s. 142(1) of the Income Tax Act, 1961 regarding Trivikram Singh Kaur Toor, H. No. 2040, Phase-10, Mohali for the assessment year 2013-14. PAN-AIJPT2871K Dear Sir, Please refer to the personal discussions held in the above noted case at the time of last hearing held on 29.09.2017. In this connection it is submitted that I have already filed the details of the purchase of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the judgment enclosed. 3. That all the conditions with regard to the market including the rate and the regular bills issued by the broker and the market rate on each day which varied from day to day basis are fulfilled in this case and as such the claim of the assessee being genuine one and as per the provisions of the law as such the same needs to be allowed. Thus in view of the Judgments above referred to the transaction of sale and purchase of shares is genuine and has rightly been claimed by the above noted assessee as long term capital gain from the sale of shares. I hope that this will meet the requirements of the above noted case. In case any other information is required the same shall filed as and when called for. Thanking you. Yours Faithfully, Sd/- (M.R. Sharma) Advocate for the assessee. 11.1. Inviting attention to pages 45 to 47, it was submitted, that again the assessee vide letter dated 16.10.2017 had brought to the notice of the AO that prior to this year, the assessee has no income on account of Long Term Capital Gain from sale of shares. It is only in the year under consideration that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s further placed as per para 12 of the aforesaid reply at Paper Book page 47 on another order of the Mumbai Bench of the Tribunal in the case of M/s. Arvind Kumar Jain, HUF (ITA No. 4862/Mum/2014) wherein various decisions of different Courts have been relied upon on near similar facts. Accordingly, it was submitted that the claim of the assessee deserves to be allowed. The copy of the order of the ITAT dated 18.09.2017 in the case of CIT Vs M/s. Arvind Kumar Jain, HUF at pages 48 to 54 relied upon before the AO, it was submitted, is available in the Paper Book and is heavily relied upon. The AO, it was submitted, recorded statement of the assessee, copy of which is available at pages 55 to 59 which again supports the case of the assessee. 11.2. Attention was invited to another reply made to the AO at pages 60 to 63 on 20.09.2017 wherein after explaining background in para-1, the specific details were made available in para 2, copy of the D-Mat account with the assessee's broker M/s. Master Capital Services showing balance of the shareholding as on 18.11.2017 was shown to the AO. Inviting attention to Paper Book page 64, it was his submission that the assessee's AO calle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue care and attention. The enquiries, it was submitted, continue till page 101. Copy of the bank statements, Invoices and copies of the D-Mat account, it was submitted, were all made available which are filed in the present proceedings from Paper Book page 102 to 160. In this background, the AO passed the present assessment order, copy of the same inclusive of the Office Note, it was submitted, is available at Paper Book pages 161 to 168. Copy of the order of the ITAT in the case of Anip Rastogi which has been relied upon by the ld. PCIT is available at pages 169 to 182 of the Paper Book. Repeating his arguments that the said decision rendered on 08.01.2019 cannot be considered to be on record which the ld. PCIT is to consider as the said order was not available at the time the AO passed the order and thus, it cannot be said to be the basis of the proceedings u/s. 263 as the AO cannot be faulted for not looking into something which was not available to him and the exercise of Revisionary Power on this ground, it was submitted, is not in accordance with law. 11.5. Even otherwise, on merits it was his submission that internal page 3 of the said order would show that the triggering....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2019 in detail, it was further argued that the case of Anip Rastogi Vs ITO which was taken into consideration by the ld. PCIT to pass the impugned order, accordingly, was completely distinguishable on facts. It was his submission that maintaining the argument that the order was not available to the AO when he passed the order, it was also re-iterated that therein the broker was M/s. Consortium Capital Pvt. Ltd. whose Director Shri Jai Kishan Poddar had given a statement and on those facts, the case of Anip Rastogi was decided against him. Inviting further attention to page 169 to 182 and page 183 and 184 of the Paper Book, it was submitted that the assessee therein had filed a M.A. No. 484/Del/2019 praying for rectification in that order dated 08.01.2019. Thus, it was argued that the order was not final as it had not been accepted by the assessee as its correctness was under challenge. However, in view of the fact that in the meantime 'Vivad Se Vishwas Scheme' 2020 was brought into play by the Finance Ministry. The assessee therein chose to settle the issue under the said Scheme and in those circumstances, the M.A. 484/Del/2019 filed immediately after the passing of the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from the copy of Demat account enclosed at pages 27 to 28 of the paper book. Later, M/s. AAR Infrastructure got amalgamated with M/s. CCL International Ltd. and according to amalgamation scheme, the assessee received 1,25,000 shares of M/s. CCL International Ltd. in the proportion of 250 equity shares Rs. 2 per share and Rs. 100 equity share of Rs. 10 per share. The shares which were allotted on 17.02.2011 have been sold after period of more than 18 to 20 months, i.e., on 29.08.2012 to 10.10.2012. The said shares have been I.T.A. No. 503/LICW/2019 Assessment Year: 2015-16 sold through stock broker M/s. Indianivesh Securities Pvt. Ltd. 17. Before us the ld. counsel has in his brief note has stated that following documents and statements were filed before the authorities below: (a) All the transactions were supported by proper Contracts Notes and delivery of shares was made through De-mat Account with stock broker, M/s. Indianivesh Securities Pvt. Ltd. (who is the member of BSE and registered with SEBI). The shares were sold in the open market. The appellant has fulfilled all the condition u/s. 10(38) of the Income Tax Act, 1961. The appellant has already filed Nat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese shares were manipulated and rigged in the stock exchange which was solely to provide accommodation entries to the various parties; and lastly, he has also referred to certain inquiry report of Investigation Wing Kolkata during the course of which certain brokers have admitted that they had provided accommodation entries in the scrip of M/s. CCL International. But nowhere in the entire assessment order, there is any reference to any material or evidence that assessee or assessee's broker have been found to be indulged in any kind of accommodation entry in this scrip. No inquiry whatsoever has been made from the broker of the assessee. Further, during the period in which assessee had purchased the shares and had sold them whether the SEBI had suspended the trading has not been I.T.A. No. 503/Lkw/2019 Assessment Year: 2015-16 mentioned, in fact, Assessing Officer himself mentions that there was brief suspension in the year 2010, whereas the assessee has purchased shares in the year 2011 and sold them in the year 2012. Coming to the financials, as culled out from the records, the revenue from the operation of M/s. CCL International Ltd. from March, 2010 to March, 2012 was betw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entical facts as would be evidenced from para 2 of the aforesaid decision which would show that in 2014-15 assessment year also, the purchase and sale of shares in M/s. CCL International Ltd. was being considered. Referring to para 4 of the aforesaid decision (internal page 4) Paper Book page 12, it was submitted, that in the facts of the said case also, it had been noticed that M/s. CCL International Ltd. had been found to be a penny stock by DIT(Investigation) Calcutta. Considering the facts as set out in para 5 which are fully applicable in the facts of the assessee's case also except for the fact that therein the transaction was through the Broker Trust Line Securities and in the case of the assessee was through M/s. Master Capital Services. In the facts of the said case also, the statement of assessees was recorded and it was noticed that all the details have correctly been given. In the said background, considering the fact that the purchase and sale was through the D-Mat Account, the rise and fall in the said scrip noticed from 06.02.2010 to 09.12.2016 as noticed in para 9, it has been held that the increase and decrease in the share price was like normal scrip and the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s. Vardhman Capital Pvt. Ltd. The sale and purchase was through D-Mat account. Copies of Contract Notice were made available. The AO denied relief relying upon DIT Wing, Kolkata wherein it had been alleged that it was a penny stock company. The Long Term Capital Gain claimed to be exempt u/s. 10(38) was held to be fictitious. The ITAT relying upon decision of the Delhi Bench of the Tribunal in the case of Mukta Gupta and noticing that apart from the report of the DDIT(Investigation) there was no material or evidence with the Revenue to conclude that apparent was not real. Accordingly, it was his submission that the claim of the assessee as per the legal position available qua this very scrip deserves to be allowed. 11.11. Attention was invited to the price movement of the scrip 531900 from 01.06.2012 to 31.12.2012 as downloaded from the internet from the BSE site at pages 45-54 was relied upon so as to argue that when the day's high and low prices are taken into consideration and looking at the number of shares and the trades being carried out of said scrip, it would show that it is a normal trading activity. On the other hand, attention was invited to Paper Book page 47 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....annot be said to be incorrectly considered by the AO. The order has been passed after due consideration of the facts available on record and the various orders of the ITAT relied upon fully support the view taken by the AO. The only decision of the ITAT i.e. Anip Rastogi on the basis of which 263 proceedings have been initiated and concluded in the order passed which is under challenge, it was submitted that therein the assessee had filed a Miscellaneous Application u/s. 254 sub-section (2) praying for rectification in the order. However, since in the meantime the 'Vivad Se Vishwas Scheme' came into existence, the assessee chose to settle in the said Scheme. Accordingly, as opposed to the sole order of the ITAT wherein facts admittedly were different on account of the statement of the broker of the firm through which the assessee traded i.e. M/s. Consortium Capital Pvt. Ltd. In all other cases considering the Long Term Capital Gain arising from sale of M/s. CCL International Ltd. as referred to earlier, the ITAT has allowed relief on identical facts and circumstances. The trading in this very company has been repeatedly held to be genuine. The impugned order, accordingly, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the fact that as per the details, the assessee has mentioned Chirava Cements and it has been noticed by the ld. PCIT that the Chirava Cement was changed to M/s. CCL International Ltd. w.e.f. 11.12.2008. Thus, the trading activity carried out for Chirava Cement, when the name of the company stood changed on 11.12.2008 was questioned. Referring to page 32 of the impugned order, it was submitted that ld. PCIT has specifically referred to the fact that as per the assessee's reply, the shares were sold at the NSE whereas the M/s. CCL International Ltd. was not listed on the said Stock Exchange. The ld. PCIT, it was submitted, has also questioned the value of the share as on 15.11.2012 which on the said date was noticed to be 664.75 and on 26.06.2012 as per the chart extracted in the order at page 32, it is shown to be Rs. 547/-. Inviting attention to pages 33 onwards, it was submitted that the opening and closing of the said share as per BSE was in the range of 537 and infact continues to rise with some fall in September. However, from 20.09.2012 it repeatedly remained at Rs. 724/- upto 12.11.2012. Accordingly, the ld. PCIT has given a finding that it was never below Rs. 505.25 d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o apply the correct law makes the assessment order erroneous in so far as prejudicial-to the interest of revenue. Hence, the said assessment order dated 27.11.2017 is held to be erroneous in so far as it is prejudicial to the interest of revenue for the reasons as discussed above in view of the provisions of section 263, inter-alia including Explanation 2(a) inserted w.e.f. 01.06.2015. Accordingly, the assessment order u/s. 143(3) dated 27.11.2017 for the assessment year 2013-14 is cancelled with a direction to the Assessing Officer to pass an order afresh in accordance with law, after allowing opportunity of being heard to the assessee." 13.4. Accordingly, she has drawn the conclusion on facts that had a proper investigation been carried out, the following points would have been emerged: 1. The assessee purchased shares of M/s. AAR Infrastructure Limited through private placement on 07.03.2011. The shares are allotted on face value of Rs. 10 per share. 2. The company applies for amalgamation with M/s. CCL International Limited and the amalgamation was made effective 01.04.2011 by the order dated 09.02.2011 of Hon'ble Delhi High Court. 3. On 01.04.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bmitted that in the lead case, facts referred may have been of Surabhi Chemicals, however, in the said decision, the shares of various other companies which were found to be penny stock bogus companies were also taken into consideration. Thus, the fact that in the question of law reproduced reference is made to only Surabhi Chemicals it was submitted, has no material significance. 17. The ld. AR maintaining his objection further objected to the argument that in the order reference had been made to M/s. CCL International Ltd. specifically page 58 highlighted by the ld. CIT-DR. Reading from the order, it was argued that it is an argument by one of the parties that the sale/purchase in these companies was telecasted in the TV Channels and these penny stock companies are genuine. It was his submission that one of the assessee's had taken the argument before the Hon'ble High Court that there are discussions on the reputed TV channels in regard to sale and purchase of shares in various companies. Thus, it was argued that these shares are legitimately traded on the Stock Exchange on the basis of advice available in the public domain and thus, the allegation that it was a bogus ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplicability to assessee's case. The company in the present case continues to operate on the Stock Exchange. The trades were made on the Stock Exchange. The supporting documents for a company which has not been de-listed and continues to operate, cannot be treated to be at par with the facts of Swati Bajaj's case. Accordingly, it was his prayer that the impugned order may be quashed. 20. We have heard the rival submissions and perused the material available on record. The legal position as considered in the respective orders by the Tax Authorities and as argued before us by the parties have all been taken into consideration. On giving our thoughtful consideration to the claims and counter claims of the parties before us, we deem it appropriate to first cull out the facts necessary for adjudicating the issue before us namely; can the order passed by the ld. PCIT u/s. 263 exercising the Revisionary Powers be said to be a valid order in the eyes of law on the basis of facts and evidences on record. 20.1. In order to examine the said question, we need to set out the relevant and necessary facts on the basis of which the answer to the said question can be determined. 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l a matter of record. We find that despite these repeated submissions extracted in the order various facile objections/observations are made by the ld. PCIT. As an illustration, the following observations have been made in para 31 of the impugned order: Page 31 of the impugned order .......................... 3. When the information provided by you was analyzed, it was seen that in the Account detail the name of security sold has been mentioned as CHIRAWA CEMENTS. On verification it has been found that the name Chirawa Cement was changed to CCL International Limited w.e.f 11/12/2008. A company whose name was changed on 11/12/2008 could not have been traded under the name Chirawa Cement after almost 4 years i.e. from 26/06/2012 to 09/11/2012 the period during which the shares were stated to have been traded. You are therefore requested to show cause as to why the transaction claimed in the name of a non-existing entity should not be treated as sham transaction. 20.4.1. The ld. PCIT again at page 31 also faults the assessee with the following observations: Page 31 of the impugned order 4. ................... In the answers give....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le Delhi High Court was under challenge in any proceedings before any Court. We have seen the queries raised by the AO; responded to by the assessee; the information sought by the AO from the Broker of the assessee; its cross checking with the AO at Central Circle Delhi wherein also similar allegation of mis-use of exemption provisions in LTCG in penny stock companies for money laundering was being enquired into in the case of assessee's parents also; the invoices; the documents showing STT, Service tax etc. deducted; the Brokers accounts and the sale of shares at the BSE supported by transactions recorded in the Bank including the accounts of the brokers etc. have all been seen and considered. These are not faulted with. In the said factual matrix on considering the queries raised and responded to by the assessee before the AO and again before the ld. PCIT we find that the suspicions of the Revenue that the assessee has indulged in participating in scheme of claiming bogus LTCG claim in order to evade tax is misplaced. In order to exercise the powers u/s. 263, the order passed by the AO has to be shown to be erroneous and prejudicial to the interests of the Revenue. No case la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thereof, the Miscellaneous Application filed by Shri Anip Rastogi therein was withdrawn. Thus, we find that the order relied upon by the Revenue admittedly cannot be said to be a final order laying down any precedent as it clearly was even not even accepted by the said assessee also as its correctness was in flux. Hence, its finality even for that assessee was under challenge. It cannot be over emphasized when considering precedents that an order/decision at best only decides what is agitated/argued and hence considered by the Court/Tribunal. Consequently, its precedent value is limited to these issues. Reference can also be made to the oft quoted decision of the Apex Court in the case of CIT Vs Sun Engineering Ltd. 198 ITR 197 wherein the Apex Court clearly cautions that; "Judgments must be read as a whole and observations in judgments should be considered in the context in which they are made and in the light of the questions that were before the court." It would not be out of context to extract the sage advice given by their Lordships in the aforesaid decision, "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd that there are many orders of Co-ordinate Benches qua M/s. CCL International Ltd. relied upon by the ld. AR which have not been rebutted by the Department. The fact remains that the assessee has successfully pleaded before us and it is not a disputed fact that the broker of the assessee and the person whose statement was considered that he was facilitating dubious transactions in M/s. CCL International Ltd. for various parties and concerns in the case of Anip Rastogi was Director Shri Jai Kishan Poddar of M/s. Consortium Capital Pvt. Ltd. were not connected. These entry providers/facilitators were strangers to the assessee. This is an undisputed fact. The assessee's transactions have not taken place through the said Director. The said Director Shri Poddar of M/s. Consortium is a stranger to the assessee. The assessee's Broker is M/s. Master Capital Services and the said Broker has confirmed the transaction of sale as genuine to the Assessing Officer. The evidence is available to the ld. PCIT and has not been rebutted or shown to be incorrect in the present proceedings. Consequently judicial finding that all brokers who have made bonafide sale and purchase in the stated c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll of businesses is replete with stories of penny stock companies sometimes rising upto becoming the multi baggers. Investment in Penny Stock companies is risk ridden and the investment depends on the risk appetite or foolish optimism of the investor but the argument that necessarily these are sham companies is based on mere suspicions. It is a fact that many of penny stock companies may fall, however, this fact by itself does not lay down the law that trading in penny stock companies is banned. Many a penny stock company can become a big player if its strategies and economic environments align. Referring exclusively to the blue chip stocks for allaying the unsupported doubts and suspicions of the doubtsayers it may be highlighted that an impartial sturdy of the rise and fall of some well established companies today would show that these were possibly penny stock companies. Reference may be made to the scrip of Eicher Motors whose share price as on 31 August, 2022 is hovering at Rs. 3411/-, it would be an eye opener to notice that in June, 1998 it was trading at Rs. 9/-. Similarly, the share price of Kotak Mahindra Bank ranging currently in the range of Rs. 1902/-, was trading in S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly the assessee should have waited and by no stretch of imagination can be construed to be a case leading to the conclusion that the transaction was manipulated or bogus. No one is capable of predicting the future Market Sentiment. The sale of the shares made by the assessee through the Stock Exchange through the D-Mat account held with the Broker M/s. Master Capital Services Ltd. who has confirmed the transactions; wherein banking transactions also reflect the same position, we find are facts which cannot be easily brushed aside on the basis of suspicions and statements of some broker who may have had his own reasons to dump his clients for unscrupulous criminal reasons. No doubt the banking transactions by itself, we agree, do not grant a legitimacy to the genuineness of the claim, however, the fact remains that these are events supported by sale of shares at the Stock Exchange through the D-Mat account coupled with the fact that there is no evidence on record that the company was ever barred from trading on the Stock Exchange or penalized for entering or entertaining shady transactions, the company even today continues to trade on the Stock Exchange. No violation by SEBI or unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y players where a dubious share is amped up in the business circles of print and media so that an incorrect sentiment of future rise in it is played out. Once the prices rise on account of trusting naive Investors, the manipulators dump their shares thereby causing loss to the ignorant investors. Hence investment in penny stock companies is a risk. For addressing dubious manipulative actions we have Market Regulators like SEBI and Company Law Board. The Indian economy on the rise cannot be allowed to be tamped down by these suspicions of the Revenue. Robust evidence has to be brought on record to address the issue. In the facts of the present case, there is no allegation of any Regulatory Authority to show that trading in this specific Stock was barred or the company was delisted. We find that suspicions entertained by the Revenue cannot be the basis of unsettling the valid order. 20.8. We have also given our serious consideration to the arguments advanced on behalf of the Revenue namely that the assessee has frequently used National Stock Exchange (NSE) instead of BSE where the company was listed and traded. The ld. CIT-DR pointing from the replies of the assessee itself before....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the suspicions so aroused have no basis. The non factoring of the Corporate Action to which the specific share has been subjected to is not rebutted by the Revenue. The fact remains that the shares have been sold on the Bombay Stock Exchange through the Broker who has confirmed the transactions. The Contract Notes are available. The funds available therefrom are reflected in the bank account. Thus, wherein the different sites are showing price of the specific share with or without corporate action and though it has been submitted that the BSE's official site supports it, the fact remains that the explanation of the assessee on account of the so called confusion based on suspicions cannot be the basis of the Revisionary Powers. 21. It may also be relevant to pause and give a serious consideration to the consequences where a broker states that all transactions entered into by him were dubious. Serious consideration need be given to such a broker's statement as all he stands to suffer from giving such a rash, irresponsible statement is a presumptive estimated addition at best on his trading activity. However, the rash statements would put in jeopardy the transactions ....