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TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 1280
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....below have denied by holding that the script in which the capital gain had accrued was a penny stock and bogus. The Learned A.R. submitted that the authorities below without confronting the assessee with the adverse material has made this addition which is not in accordance with law. Without prejudice he submitted that the only reason for disallowing the claim was that the assessee had managed to arrange capital gain through the script of SRK Industries, whereas in a number of cases, different Benches of the Tribunal in different cases have considered this aspect and have held the script of SRK Industries dealt by the assessee to be a genuine script and have allowed relief to the assessee and in this respect reliance was placed on the following case laws: (i) I.T.A.T. Kolkata 'C' Bench order dated 28/11/2018 in the case of Aditya Vikram Sureka HUF vs. Income Tax Officer, Ward-34(2) in I.T.A. No.1650/Kol/2018. (ii) I.T.A.T. Kolkata 'SMC' Bench order dated 25/07/2018 in the case of Shreyans Chopra vs. ACIT in I.T.A. No.661/Kol/2018. (iii) I.T.A.T. Kolkata 'B' Bench order dated 12/02/2019 in the case of Shri Pawan Kumar Todi vs. Income Tax Officer in I.T.A. No.2243/Kol/2017 (i....
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....ned counsel for the assessee submitted that the assessee had sold some property and had paid commission to two parties amounting to Rs.1,00,000/- and the Assessing Officer disallowed the same holding that tax was not deducted at source u/s 194H of the Act. The Assessing Officer further held that the assessee had not provided the addresses of the persons to whom such commission was paid. Learned counsel for the assessee submitted that this issue may be remanded back to the Assessing Officer so that necessary evidence can be provided and the Assessing Officer can readjudicate the same. 5. Learned D.R., on the other hand, submitted that the authorities below have confirmed the addition as the Investigation Wing of the Department had carried out detailed investigation and wherein the script was found to be a bogus script and the authorities below have made and sustained the addition correctly. He heavily placed reliance on the orders of the authorities below. The Learned D. R. then filed written submissions on 08.12.2020 which has been made part of this order and are reproduced below: "During the course of the hearing in case of Smt. Madhu Agarwal for Assessment Year 2014-15, the Ho....
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....he Investigation Wing of the Department and noting down the modus operandi wherein Long Term Capital Gain or Capital Loss is managed by various persons with the help of various intermediateries, noted that the assessee had managed to get the Long Term Capital Gain and actual income had not been earned and therefore, he issued a detailed show cause notice to the assessee. The assessee filed a detailed reply which is placed at pages 103 and 104 of the paper book wherein it was submitted that the shares were sold through SEBI registered broker and shares were listed at Bombay Stock Exchange and security transaction tax was paid and the sales proceeds were received through banking channels. The Assessing Officer however did not accept the contentions of the assessee and made the addition of the capital gain u/s 69B of the Act. 7. Aggrieved with the addition the assessee filed appeal before learned CIT(A) who dismissed the appeal of the assessee. While dismissing the appeal the learned CIT(A) also relied on the judgment of Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain (supra) and held the income to be income from business. The assessee had filed detailed submissio....
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....ains amounting to Rs. 78,57,121/- on sale of these 86,580 equity shares of M/s SRK Industries during January & February , 2014 and same has been held in de-mat account and it is from de-mat account that the same had been sold during year under consideration. The sale consideration stood fully supported by contract notes issued by brokers, exit entries in denial, account & STT was paid. 1.3 Considering facts and circumstances of the case, I hold that A.O. was correct in disallowing LTCG of Rs. 78,57,121/- claimed as exempt u/s 10(38). Appellant purchased bogus scrips Of M/s SRK Industries and earned huge profit after holding same for more than 15 months or less. Investigation wing of Income Tax Department has thoroughly investigated each and every aspect of this alleged scrips ( M/s SRK Industries) and declared the ,scrip as bogus . Calcutta Stock Exchange Ltd., a broker traded in alleged penny stock namely M/s SRK Industries. This alleged company has no credential to justify the sharp rise in market price of its share .The sharp rise in market price of the shares of these entities is not supported by fundamentals of the company or any other genuine factors. In spite of such trifl....
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....nsacted were mentioned. We also find that there is no mention of any connivance on the part of the assessee with the share broker and stock exchange to launder the unaccounted monies of the assessee and bring it back in the form of sale proceeds of shares and claim exemption u/s 10(38) of the Act for the long term capital gains derived thereon. None of the parties on whom survey actions were conducted were related to assessee or the brokers in any manner whatsoever. We find that the various purchase and sale details together with the supporting evidences were not controverted by the revenue before us. The revenue had not brought on record any adverse order passed by SEBI linking the assessee or her broker with the alleged price rigging and manipulation. Hence there is absolutely no iota of evidence linking the assessee or the registered brokers to even remotely allege that they were involved in artificial rigging of price of scripts which were dealt by the assessee herein. The statements of various operators were recorded by the ld AO and the same are reproduced in the assessment order. But nowhere in those statements, the name of the assessee or the broker through whom the assesse....
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....R on the decision of Hon'ble Supreme Court in the case of CIT vs Dhanrajgiri Raja Narasingirji reported in 91 ITR 544 (SC). 7.2. We find that the ld AR pleaded that in an online platform, there would be no nexus between the purchasers and the seller and the delivery of shares and payments would be made through their respective stock brokers. Hence the ld AO ought to have summoned the assessee's brokers to examine the authenticity of the sale of shares of SRK Industries Ltd and the amount received on sale of shares. We find that the ld AR also placed evidences on record to prove that the said company SRK Industries Ltd is still listed in the stock exchange and shares of this company are being traded and SEBI had not passed any adverse order against the said company either suspending the trading of the scrip or banning the scrip. Moreover, the ld AR also placed on record the letter dated 14.2.2019 addressed by SRK Industries Ltd to Bombay Stock Exchange informing the outcome of the Board Meeting held on 14.2.2019 approving the unaudited standalone financial results of SRK Industries Ltd for the quarter ended 31st December 2018 in the format prescribed by SEBI listing norms and the ....
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.... of the Act. The assessee has received the sale proceeds of shares from her broker M/s Sharekhan Limited. The assessee had shown the credit in the name of M/s Sharekhan Limited in her books. Hence the assessee had duly discharged her onus by furnishing the entire sale details made through the registered stock broker M/s Sharekhan Limited. We find that the ld AO had not even bothered to make any enquiry with M/s Sharekhan Limited to understand these facts. Hence no fault could be attributed on the assessee in this regard. We find that none of the purchase and sale details with supporting evidences were found to be deficient in any manner whatsoever either by the ld AO or by the ld CITA. 7.4. We find that the assessee was duly examined on oath u/s 131 of the Act during the course of assessment proceedings on 29.11.2016 which fact is also mentioned in Page 26 of the Assessment Order. In the said statement, the assessee in reply to Question No. 9 had categorically stated that she had been making investments in capital market and equity shares through broker M/s Sharekhan Limited and through relatives and friends. The assessee had also categorically replied in response to Question No.....
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....me and all these transactions are duly reflected in the demat statements issued by the depository participant. 7.6. We find that the ld DR made general submissions with regard to the investigations carried out by Kolkata Income Tax Department after identifying 84 scrips to be penny stocks and the modus operandi adopted by those scrips with the connivance of various entry operators, brokers and stock exchange. We find that the ld DR was not specifically able to controvert the documentary evidences filed by the assessee for purchase and sale of shares and various other documents referred to in the Paper Book. The ld DR also filed written submissions wherein he had reiterated the findings of the ld AO. 7.7. We find that the co-ordinate bench of Kolkata Tribunal in ITA No.661/Kol/ 2018 in Shreyans Chopra vs ACIT dated 25.7.2018 on similar set of facts and circumstances had held as follows:- "IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA 'SMC' BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member) ITA No. 661/Kol/2018 Assessment Year: 2014-15 Shri Shreyans Chopra ......................................................... Appellant 3A, Mangoe Lane Kolkata - 700 001 ....
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....pital gain on sale of shares exempt from taxation u/s 10(38): Name of the company Sale price Purchase price Exempt u/s 10(38) SRK Industries Ltd. 5,57,658 7,500 5,50,158 Shares were purchased off market @7,500/- but their value increased later in pursuant to order dated 21/12/2013 of Bombay High Court and order dated 21/02/2013 of Madras High Court vide letter no. SRK/SA/elec/ 000771/2013 dated 20.05.2013. In course of the assessment, the assessee was asked to furnish the details of such share transactions. 3. The Assessing Officer in his detailed order discussed the modus operandi as well as the other evidences available with him and, thereafter, at para 6 & 7, concluded as follows:- "6. Thus in view of the elaborate discussion made above, I hereby hold the amount of Rs.5,57,658/- introduced/credited by the assessee out of these purported share sale receipts during the Financial Year 2013-14 (AY 2014- 15) in his capital account as his income being unexplained cash credit u/s 68 of the Income Tax Act (taxable at the rate of 30% as provided u/s 115BBE). Therefore, an amount of Rs.5,57,658/- is added back with the total income of the assessee u/s 68 of the I.T. Act as....
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....rty alleging so, that this assessee in quesiton was part of this scam. The chain of events and the live link of the assesee‟s action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. 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 statements recorded etc. has to also be brought on record in each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assessee, if the AO relies on any statements or third party as evidence to make an addition. 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 by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior by the department. 14. It is we....
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....wever we do not find that, the assessing officer as well as the Ld. CIT(A), have brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a part of any arrangement for the purpose of generating bogus long term capital gains. Nothing has been brought on record to show that the persons investigated , including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact the investigation wing 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 against the assessee. In absence of any finding specifically against the assessee in the investigation....
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....ometax Officer. As regards the disclosed volume of business in the year under consideration in the head office and in branches the Income-tax Officer indulged in speculation when he talked of the possibility of the appellant earning a considerable sum as against which it showed a net loss of about Rs. 45,000. The Income-tax Officer indicated the probable source or sources from which the appellant could have earned a large amount in the sum of Rs.2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which 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 den....
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....cross-examine the representatives of the firms concern, to establish that the goods in question had been accounted for in their books of accounts, and that excise duty had been paid. The Court held that such a request could not be turned down, as the denial of the right to crossexamine, would amount to a denial of the right to be heard i.e. audi alteram partem. 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against 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 crossexamination. ....
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....ned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross examination of the said dealers could not have brought out any material which would not be in possession of the Appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Appellant wanted to crossexamine 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....
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....ng the position, Tribunal having analyzed the set of facts in coming to its finding, we do not think there is any scope of interference with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed." b) The JAIPUR ITAT in the case of VIVEK AGARWAL [ITA No. 292/JP/2017] order dated 06.04.2018 held as under vide Page 9 Para 3: "We hold that the addition made by the AO is merely based on suspicion and surmises 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 PREM PAL GANDHI [ITA95-2017 (O&M)] dated 18.01.2018 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 fic....
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....IT (A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act." Further in Page 15 Para 8.5 of the judgment, it held: "We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been 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: "........ W....
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....t the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the ld AO. We find that the allegation that the assessee and / or Brokers getting involved in price rigging of SOICL shares fails. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting 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) of the Act." g) The BENCH "H" OF MUMBAI ITAT in the case of ARVIND KUMAR JAIN HUF [ITA No.4682/Mum/2014] order dated 18.09.2017 held as under vide Page 6 Para 8: "......We found that as far as ini....
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....ion(s) of law as sought to be raised in the present appeal. Hence, the present appeal is dismissed." i) The Hon‟ble Jurisdictional Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: "The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income Tax(Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assessee through bank." j) The Hon‟ble Supreme Court in the case of PCIT vs. Teju Rohitkumar 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 recycl....
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....relied upon by the ld DR before us on the decision of Hon'ble Bombay High Court (Nagpur Bench) in the case of Sanjay Bimalchand Jain vs Pr.CIT (Nagpur) reported in (2018) 89 taxmann.com 196 (Bombay) dated 10.4.2017 on the impugned issue. From the facts of Sanjay Bimalchand Jain supra, we find that (i) in that case, the broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee ; (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash ; (iii) The address of both the companies were interestingly the same ; (iv) The authorized signatory of both the companies were also the same person ; (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon'ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were present in the facts of the assessee before us. Hence it could be safely concluded that the deci....
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....he action of the ld AO in bringing the long term capital gains on sale of shares of SRK Industries Ltd in the sum of Rs 2,26,36,372/- as unexplained income of the assessee treating the same as just an accommodation entry. The ld AO is directed to grant exemption u/s 10(38) of the Act in the sum of Rs 2,26,36,372/- to the assessee. Accordingly, the ground raised by the assessee is allowed. 8. Both the parties before us agreed that the facts in ITA No. 694/Mum/2018 in the case of Shri Shashikant B Mhatre (HUF) are identical to that of Smt Geeta Khare supra except with variance in figures and name of the scrip that was dealt with. Both the parties before us stated that identical reasoning was given by both the lower authorities for denying the claim of exemption u/s 10(38) of the Act to the assessee. The decision rendered in the case of Smt Geeta Khare would apply with equal force for this assessee also and accordingly, the ground raised by the assessee in ITA No. 694/Mum/2018 is allowed. 9. In the result, both the appeals of the assessee are allowed." 8. Similar are the findings in other case laws relied upon by the assessee. Here it is important to reproduce the findings of Hon....
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....h any statement or material alleged to be the basis of the report ITA No. 2243/Kol/2017 Pawan Kumar Todi, AY 2014-15 of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given. 4. Under the circumstances, in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalization, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions. Some of the cases were detailed finding which are listed below :- SI. No. ITA Nos. Name of the Assessee Date of order /judgment I 1236-1237/K/17 ITAT-Kolkata Manish Kumar Bald & Ors Vs. ACIT 18.08.2017 2 443/Kol/2017 Kiran Kothari (HUF) vs ITO 15. 11.2017 3 22 of 2009 Calcutta High Court CIT, Kolkata-III vs Bhagwati Prasad Agarwal 29.04.2009 4 456 of 2007 Bombay High Court CIT vs Shri Mukhesh Ratilal Marolia 07.09.2011 5 18 of 2017 Punjab and Haryana High Court Pr. C.I.T. (Central) Ludhiana vs Sh.Hitesh Gandhi, 16.02.2017 6 95 of 201 7 Punjab and Haryana High Court Pr. C.I.T. vs Prem Pal Gandhi ....
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....t of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the Id. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit." 8.1 The above case law of Hon'ble Bombay High Court has further been distinguished by Mumbai Bench of the Tribunal in the case of Geeta Khare in ITA No. 2243/Kol/2017 where the Hon'ble Tribunal has held as under: "7.8 It would be pertinent to address the case law relied upon by the ld DR before us on the decision of Hon'ble Bombay High Court (Nagpur Bench) in the case of Sanjay Bimalchand Jain vs Pr. CIT (Nagpur) reported in (2018) 89 taxmann.com 196 (Bombay) dated 10.4.2017 on the impugned issue. From the facts of Sanjay Bimalchand Jain supra, we find that (i) in that case, the broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee; (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash; (iii) The address of both the companies were interestingly the same; (iv) The ....