TaxTMI 
TaxTMI 
2023 (1) TMI 613
X X X X Extracts X X X X
X X X X Extracts X X X X
.... report furnished by the AO wherein it is categorically mentioned by the AO that the assessee has skillfully manipulated the long term capital gain. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the additions made by the AO. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer be restored." 3. The ld.DR began by pointing out that the sole grievance of the Revenue against order passed by the ld.CIT(A) in the present case was with regards to deletion of addition made by the Assessing Officer (AO) on account of long term capital gain finding it to be bogus transaction and a mechanism devised by the assessee to book its illegitimate gains without paying any tax thereon by claiming it as exempt long term capital gains under section 10(38) of the Act. The ld.DR stated that the solitary basis with the ld.CIT(A) for deleting the addition made by the AO was his finding that the AO's case holding the transaction of long term capital gain to be bogus rested entirely on the interim order of the SEBI in the case of the scrip dealt with in by the assessee, finding it to be manipulated and bog....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reholders who were exiting their holding so as to bring in their illegitimate claims by way of exempting long term capital gain, and though the interim order indicted the company, whose shares were dealt with by the assessee, as being manipulated by the said parties, the final order absolved the company of all these charges. That the case of the department was also the same that the prices of the shares transacted were manipulated. That therefore, the final order of the SEBI was very relevant to the issue on hand and the ld.CIT(A) therefore had not erred in relying upon this final order for deleting the addition made. ii) He further pointed out that identical issue relating to the same scrip as dealt with by the assessee in the present case, of M/s.Mishka Finance& Trading Ltd., was dealt with by the ITAT, Jaipur Bench in the case of DCIT Vs. Prakash Chand Sharma in ITA No.780/JP/2019 dated 18.11.2020 wherein relying upon same final order of the SEBI, absolving the company of all charges of fraudulent manipulation in the prices of scrip, the ITAT had deleted the addition made on account of bogus long term capital gains. The facts being identical to the present case, the issue was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,00,000. * During the impugned year, the assessee sold 18,05,700 shares on various dates for total value of Rs.9,30,66,066/- earning long term capital gains thereon at Rs.8,90,34,398/- which was returned as exempt from taxation as per the provision of section 10(38) of the Act. 8. It is a fact on record that SEBI had passed interim order in relation to this scrip by "MFTL" holding that preferential allotees and promoters related entities had, with the aid of exit providers, misused the Exchange mechanism to exit at a higher price in order to book illegitimate gains with no payment of tax as long term capital gain, as long term capital gain is exempt under section 10(38) of the Act. This order of the SEBI is reproduced at para 4.5 of the assessment order, and the AO ,referring to this order and taking note of the same, had held the transactions to be fraudulently manipulated by the assessee. It is also fact on record that the final order of the SEBI absolved this scrip from all these charges. The relevant portion of the final order of the SEBI absolving MFTL of charges of price manipulation with respect to the shares sold by the assessee specifically was pointed out at para-7& ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raded in by the assessee, and the ld.CIT(A) had therefore erred in deleting the addition merely on the basis of final order of the SEBI absolving the scrip of all charges alleged in the interim order. We have gone through the assessment order, and we find that the entire case of the AO rested on interim order of the SEBI. With respect to any other aspect casting doubts and leading to the conclusion that the share prices were manipulated at an unreasonable price when sold, we do not find any discussion in the entire order on the same. There is only a show cause notice issued by the AO to the assessee, dated 21.11.2016,where the AO mentions unreasonably high price of sale of these scrips. The same is reproduced in the assessment order as under: 11. A perusal of this show cause notice reveals that except for mentioning the fact that the shares have been sold at a very high price, there is no discussion as to how the price was found to be unreasonable .There is no discussion of the financials of the scrip dealt with by the assessee; there is no absolutely no basis established on merits by the AO as to why sale of these shares were at suspiciously high price. In the assessment order, a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of natural justice for want of cross examination as per law. The SEBI report on which the AO has placed reliance was only an interim report and there is no adverse findings in the final report. The appellant in no way was connected/ related with the Mishka or its promoters even remotely. The SEBI in its final report has nowhere mentioned anything incriminating against the appellant. The facts of the case are that the appellant had applied for 25,000 equity shares of Pyramid Trading and Finance Ltd (PTFL) @ Rs 85/- per share including premium of Rs 751- per share on 05.09.2012. The shares were allotted to the appellant on preferential basis on 9.11.2012 in demat form and the shares were credited in appellant's demat account on 19.11.2012. The payment through cheque No.531602 drawn on Indian Overseas Bank of the appellant has been made for purchase of original shares on 20.09.2QJL2. The Pyramid Trading and Finance Ltd (PFTL) is a listed company and its shares are quoted on the Bombay Stock Exchange (BSE). The name of the PTFL was subsequently changed to Mishka Finance and Trading Ltd (MFTL). The MFTL declared bonus in the ratio of 1:7 and the appellant got 175000 shares by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e SEBI itself. The relevant portion of para 8 of SEBI report dated 05.10.2017 is reproduced as under:: "8. Considering the fact that there are no adverse findings against the 104 entities mentioned at S.No. 1-104 in Table No,2 with respect to their role in the price manipulation/prima facie violations for which interim Order dated April 17, 2015 was passed and subsequently confirmed in the scrip of Mishka warranting continuation of action under section 11B and 11(4) of the SEBI Act, I am of the considered view that the directions issued against them vide interim order dated April 17, 2015 which were confirmed vide Orders dated October 12, 2015, October 21, 2015, April 13, 2016, July 05, 2016 and August 26,2016, are liable to be revoked." The perusal of list of entities mentioned therein indicates appellant's name at Sr.No.20, hence, the appellant has been absolved of any wrong doing. Consequently, the argument of the AO has fallen flat and there is no other independent finding to fasten the tax liability on the appellant. As per Section 10(38) of the Act any income arising from the transfer of a long term capital asset being an equity share in a company is exempt where....