TaxTMI 
TaxTMI 
2023 (1) TMI 613
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....rred in law and on facts in not considering the remand 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 ....
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....th in by the assessee was, whether the price of shares had been manipulated so as to benefit shareholders 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 ....
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....ccount. * On 18.1.2014 the face value of Rs.10/- each share was split into face value of Re.1/- each and thus quantity of 2,00,000 shares become 20,00,000. * 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 t....
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....CIT(A) had grossly erred in deleting the addition made by the AO. 10. Taking up the first contention of the Revenue that the addition made by the AO was not solely on the basis of SEBI order in the case of the scrip traded 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 di....
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....ns on the basis of report of the Security and Exchange Board of India (SEBI). It is alleged by the appellant that neither a copy of report was afforded to them nor any independent evidences gathered, therefore, there is gross denial 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 lis....
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.... than 12 months before they were sold through BOLT of BSE and the proceeds have been received through banking channel, STT has been paid. The main stand of the AO which was picked up from SEBI interim report has also been decimated by the final report of the 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 argume....
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....(A) 's order deleting the addition of Rs.8,90,28,838/- in the present case is fortified by the said decision of the ITAT. As for the decision of the Hon'ble Calcutta High court in the case of Swati Bajaj (supra), the Ld.Counsel for the assessee has rightly distinguished the same on facts pointing out that in those case there was no reference to any order of SEBI in the scrips traded in. That accordingly the Hon'ble High Court had dealt with the issue on merits referring to the financials of the scrips not supporting the high prices at which it were sold and accordingly holding that the assessee in such circumstances was required to establish the genuineness of the transactions. The Ld DR was unable to controvert the factual distinction pointed out by the Ld.Counsel for the assessee as above. We agree therefore, in the light of the factual distinction, that the decision of the Hon'ble Calcutta high court is not applicable in the present case. 15. In view of the above, we do not find any infirmity in the order of the Ld.CIT(A) deleting the addition made on account of alleged bogus long term capital gains of Rs.8,90,28,838/-. Accordingly, the grounds of the appeal of the Revenue....