TaxTMI 
TaxTMI 
2022 (8) TMI 1333
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.... confirming the addition after ignoring to the various documents & evidence related to exempted long term capital gain treated as other source of Income. 3. On the fact and circumstances of the case the Learned CIT (A) erred in framing the order after observing as the statement of Appellant recorded during the Assessment Proceedings. And he denied of dealed of Shares of M/s Turbo Tech Engineers Ltd. Thus whole Appeal Order has been framed on warm facts. Hence bad in Law. 4. On the facts & in the circumstances of the case the Learned CIT(A) erred in not accepting the fact that the Assessment for the Assessment Year 2014-15 has been finalized after keeping in view of general information of Investigation Wing instead of specific of the assessee. 5. On the facts & in the circumstances of the case Learned CIT(A) erred in not appreciating the facts that the Assessee earned long term Capital Gain on Transfer in Single Scrip of M/s Turbo Tech Engineers Ltd. 6. That on the fact and in the circumstances of the case, the learned CIT (A) has erred in confirming the action of AO regarding addition of the Notional Commission calculated on such Share Transaction without any evidence t....
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....ion of Rs. 64,58,168/- in respect of bogus capital gain, and (ii) addition of Rs. 1,29,162/- on account of estimated brokerage cost incurred by assessee out of unexplained sources. 6. Before proceeding further, we may note down the undisputed facts of the impugned transactions of capital gain, as culled out from the assessment-order, the order of Ld. CIT(A) and the material held in the Paper- Books submitted by parties so that the issues can be better understood in subsequent paragraphs: (i) Purchase - The assessee purchased 35,000 shares of Turbotech Engineering Ltd. for a sum of Rs. 1,77,192/- on 04.04.2012 through M/s Pragati Shares and Stock Services, a SEBI-registered member of The Inter-Connected Exchange, Mumbai. The Contract-Note of purchase is placed in the Paper-Book, which demonstrates that the assessee has paid brokerage, service-tax and STT on purchase. The purchase is made through stock-exchange and the Order No., Trade No., Settlement No. and Trade-timings are duly mentioned in the Contract-Note. The purchase consideration was paid in cash which is a fact noted by Ld. AO on Page No. 4 of the assessment-order and also admitted by Ld. AR during hearing. (ii) Holdi....
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....ng Ltd. and observed that the market price is unrealistic and not related to the financial results of the company. Ld. AO observed that the price of share was very low till January, 2011 which then continuously increased. Thereafter, the price again fell down and came to initial stage. Ld. AO, thus, observed that the market price of the share was artificially and intentionally rigged by about 3644% when there was no related-growth in the company with an objective to provide accommodation entry. (v) Ld. AO issued a summon u/s 131, followed by reminders, to the assessee to afford an opportunity to the assessee as also to ascertain the truth of the transactions undertaken by assessee. But the assessee did not appear. Ld. AO, therefore, concluded that the assessee did not have knowledge of the financials and credentials of Turbotech Engineering Ltd., whose prices have registered a whopping increase of 3644% in just one year. (vi) Ld. AO also gathered data of the persons who purchased shares from the assessee through the stock-exchange and issued notices u/s 133(6) to those persons. In the notices, Ld. AO called upon those persons to submit the relevant details. However, none of the....
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....IT (2011) taxmann.com 276 (P&H) (f) Usha Chandresh Shah Vs. ITO (2014-TIOL-1459-ITAT-MUM) (g) Ratnakar M Pujari Vs. ITO (2016-TIOL-1746-ITAT-Mum) 11. Before us, the Ld. AR made a very lengthy submission. Ld. AR drew our attention to the various documents placed in the Paper-Book to explain that the transactions undertaken by assessee are very much genuine. The Ld. AR raised several contentions, which we precisely summarize below: (i) The purchase and sale transactions are adequately supported by the documents in the form of Contract-Notes, Demat A/c and Bank Statement. The lower authorities have not found even iota of deficiency in any of these documents. (ii) The purchase and sale transactions were done in a recognized stockexchange through the members of stock-exchanges who are registered by SEBI. Nothing adverse is found by lower authorities with regard to those members. (iii) The Contract-Notes include Trade Nos., Contract Nos., Settlement Nos. and Trade Timings and there is no dispute over those details. (iv) Contract-Notes clearly evident that the assessee has paid statutory levies such as Service-tax and STT, which have certainly gone to the pocket of exchequer.....
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....ntra, Ld. DR placed heavy reliance on the observations and reasoning given by lower authorities and argued that the transactions done by assessee are only paper-transactions and the capital gain declared by the assessee is not a real profit but a bogus income arranged by assessee. According to Ld. DR, the assessee has arranged bogus capital gain to claim the benefit of section 10(38). During his arguments, the Ld. DR emphasized following vital aspects: (i) During assessment-proceeding, the Ld. AO summoned the assessee by issuing summon u/s 131. But the assessee did not appear before Ld. AO. The attitude of assessee is thus indicative that the assessee does not want the department to cull out truth. Non-compliance of statutory summon issued u/s 131, must lead to the conclusion against the assessee. (ii) The assessee has purchased shares of a company which had neither financials nor potential. The assessee has not produced any adviceletter of the broker or competent person who had advised to invest hard-earned money in the game of such a weak company. (iii) It is true that the assessee has also made investment in other shares but that that investment is very nominal. Further th....
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....rve that in some decisions, the additions were made in the proceeding of section 153A/153C but the same were deleted there being no incriminating evidence. In some cases, the additions were deleted on the ground that the shares transacted by the assessee were not appearing in the Investigation-Report prepared by Investigation Wing, Kolkata of income-tax department. In some cases, the additions have been deleted because the assessee has not claimed any benefit of exemption u/s 10(38) or set-off of losses but the assessee has offered the profit from alleged transactions as normal income and paid legitimate tax. Yet in some cases, the additions have been deleted or confirmed on the basis of off-market transactions or transactions done in cash. In some cases, the additions have been deleted or confirmed accepting / not accepting the absence of cross-examination, non-compliances of notices by the assessee or preponderance of probability, human behavior, etc. Hence every decision has its own set of facts, circumstances, analysis and angles of thought and there cannot be a universal conclusion. However, in all fairness, we would like to discuss the decisions relied upon by the assessee: ....
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....y Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. The Ld. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the assessee, she was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to all the persons who have brought the scrips in the entire country. Thus, under these circumstances, at least some inquiry should have done from these persons, whether they have provided any entry to the assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis any adverse inference is drawn, then it cannot be primary evidence or material to nail the assessee and simply based on the statement no addition can be made. This has been held so by various courts, and also by Hon'ble Apex Court in the case of M/s Andaman Tiimber Industries vs. CCE (SC) reported in 127 DTR 241 has ....
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....later) is against assessee. Furthermore, in the present-case, it is the claim of revenue that the Ld. AO provided an opportunity to the assessee by issuing a summon u/s 131 but the assessee did not avail. Regarding the second reasoning of suspension of operations by SEBI, the Investigation-Report prepared by Investigation-Wing, Kolkata of Income-tax Department (which we shall discuss little later), clearly mentions that the SEBI has suspended operations of Turbotech Engineering Ltd. Thus, both of the points considered in this decision for giving relief to the assessee, are not existing in the present appeal before us. Hence this decision is not applicable. (b) ITAT Kolkata in Smt. Rachna Agarwal Vs. ITO, Ward-28(4), order dated 08.04.2022: Ld. AR has relied upon this decision which is a very recent one in favour of assessee. We extract below the relevant paragraphs: "20. We therefore note that since the purchase and sale transactions are supported and evidenced by confirmations, Contract Notes, Demat statements and bank statements etc., the same could not be treated as bogus simply on the basis of some report of the Investigation Wing and/or the orders of SEBI in case of ent....
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.... 08.04.2022 but subsequently the Hon'ble High Court of Kolkata has held in favour of revenue in a recent decision dated 14.06.2022 in the case of Swati Bajaj (we shall discuss this decision little later). Therefore, we have to follow the decision of Hon'ble High Court of Kolkata which is a higher forum than the Kolkata Bench of ITAT. Hence the assessee does not get benefit of this decision too. (c) PCIT Vs. Smt. Krishna Devi - ITA No. 125, 130 and 131 of 2020, decision dated 15.01.2021 (Delhi High Court): This decision has already been taken note of in the recent decision of Hon'ble Kolkata High Court in Para No. 21 in Swati Bajaj (we shall discuss a little later). The Hon'ble Kolkata High Court has finally ruled in favour of revenue. Hence the assessee does not have any benefit of this decision too. Thus, all decisions relied upon by Ld. AR do not support the assessee's case. 16. Now comes the turn of the decision of Hon'ble High Court of Kolkata in PCIT Vs. Swati Bajaj, ITA No. 06/2022, dated 14.06.2022 decided recently in favour of Revenue. The decision is much detailed; has considered various legal precedents of the Hon'ble Supreme Court and other Courts; has taken into ....
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....of the Respondent viz. SEBI vs. Kishore R. Ajmera [(2016) 6 SCC 368] and Dushyant N. Dalal vs. SEBI [(2017) 9 SCC 660]. Suffice it to hold that these cases are distinguishable on the facts of the present case, as the former is not a case of insider trading but that of Fradulent/Manipualtive Trade Practices; and the latter case relates to Interest Penalty rather than the subject matter at hand. Reliance placed on the case of Kishore R. Ajmera (supra) to show that presumption can be drawn on the basis of immediate and relevant facts is contrary to law already settled by this Court in the case of Chintalapati Srinivasa Raju (supra) where it is held that "a reasonable expectation to be in the know of things can only be based on reasonable inference drawn from foundational facts." It has further been held that merely because a person was related to the connected person cannot be itself be a foundational fact to draw an inference." 71. On a careful reading of the above paragraph will show that the argument by placing reliance on the case of K.R. Ajmera to show that presumption can be drawn on the basis of immediate and relevant facts was contrary to the law already settled by the Hon&....
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.... done by them and by relying upon the documents in their hands to contend that the transactions done were genuine. Unfortunately, the test of genuinity needs to be established otherwise, the assessees are lawfully bound to prove the huge LTCG claims to be genuine. In other words if there is information and data available of unreasonable rise in the price of the shares of these penny stock companies over a short period of time of little more than one year, the genuinity of such steep rise in the prices of shares needs to be established and the onus is on the assessee to do so as mandated in Section 68 of the Act. Thus, the assessees cannot be permitted to contend that the assessments were based on surmises and conjectures or presumptions or assumptions. The assessee does not and cannot dispute the fact that the shares of the companies which they have dealt with were insignificant in value prior to their trading. If such is the situation, it is the assessee who has to establish that the price rise was genuine and consequently they are entitled to claim LTCG on their transaction. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the r....
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....nd also the decision in IRC Versus Duke of Westminster 91 . 74. In our considered view we need not travel thus far and wide to examine as to how and what is said and what is not said in McDowell Mr. Soumen Bhattacharya referred to the decision for the simple reason, to point out that tax planning may be legitimate provided it is within the frame work of law as colourable devices cannot be part of tax planning which cannot be encouraged. Therefore what we are required to see is whether the claim made by the assesees before us are legitimate and whether there was any colourable devices adopted in the process and these colourable devices may or may not be directly but indirectly attributable to the assessee. Therefore, we need not labour much to examine as to how rule in McDowell needs to be applied as we are required to examine the factual scenario from the cases on hand which appear to be quite unique not probably drawn the attention of the courts and the tribunal earlier. 75. While it may be true that M/s. Swati Bajaj, Mr. Girish Tigwani or other assessees who are before us could have been regular investors, investors could or could not have been privy to the information or m....
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....urbotech Engineering Ltd." is appearing in this Investigation-Report and the share is identified as "Penny stock". We gainfully reproduce the relevant paragraphs of the Report: Page No. 2 of the Forwarding-Letter embodied in the Report: "We identified the following BSE listed penny stocks which have been used for generating bogus LTCG: SL No Script Code Script Name Full Name of Penny Stock Amount of Total Value 62 504358 Turbo Tech Turbotech Engineering Ltd. 8319513048 Page No. 12 / 14 of the Report "4. Project Basis Enquiry of the scam. Various enquiries have been conducted by the Directorate of Investigation, Kolkata, on a project basis, which has resulted into the unearthing of a huge syndicate of Entry Operators, share brokers and money launderers, involved in providing bogus accommodation of Long Term Capital Gain, Short term capital loss. It has come to light that large scale manipulation has been/is being done In market price of shares of certain companies listed on the Bombay Stock Exchange by certain persons working as a syndicate in order to provide entries of tax exempt bogus Long Term Capital Gains to large number of persons in lieu o....
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....n-Report. Further, SEBI has also "suspended" operations in this scrip, which is clearly mentioned in the last Column of the Table on Page No. 33 of the Investigation-Report reproduced above. This is the first and most important factor to demonstrate that the scrip falls in what is called as "penny stock". (ii) The assessee has purchased shares for Rs. 1,77,192/- in cash on 04.04.2012 and not through banking channel. This raises a very strong doubt in so far as the assessee has made purchases from a Bombay-based broker. The prevalent trend in the stock-market is to pay / receive through banking channel. How can assessee venture to pay a sum of Rs. 1,77,192/- in cash to a Bombay-based broker? (iii) On a careful perusal of Demat A/c, the Bench observed that the shares were credited in the Demat A/c of assessee on 08.10.2013 i.e. after a period of about 17 months from the date of purchase and just before the date of sale on 10.10.2013 / 17.10.2013. Therefore, the Bench raised a query as to where the shares had gone during the intervening period of 17 months from the date of purchase till the date of sale. In response, the Ld. DR replied that the share were held in the Pool A/c of ....