TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 925
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....ch (India) Ltd. u/s. 68 of the I. T. Act, 1961 on the ground that the sales and purchase of the above shares were not genuine. The appellant has purchased 2 lakh shares of M/s. Naisargik Agritech (India) Ltd. of face value of Rs.10/- for Rs.20 lacs on 15/03/2011. The appellant sold these shares from 23/06/2014 to 11/07/2014 on Bombay Stock Exchange through the broker Shri Pravin Ratilal Share & Stock Brokers Ltd. and claimed long term capital gain exempt from tax u/s. 10(38) of the Act. The AO however, did not allow the claim of long term capital gain on the ground that the purchase and sale of shares of M/s. Naisargik Agritech (India) Ltd. was carefully executed plan to generate bogus long term. The AO stated that the assessee has purchased the shares of a company which was suspended from trading at BSE from 10/04/2000 and has sold it between 3/06/2014 to 11 /07/2014 when the trading of share resumed on BSE for two to three months. The AO therefore held that the sharesof M/s. Naisargik Agritech (India) Ltd. has been used to accommodate long term capital gain beneficiaries. The AO has relied upon the case of Mumbai High Court in the case of Sanjay Bimalchand Jain in Income Tax Appe....
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....td. treating them as non genuine. The appellant has submitted copy of application for shares, allotment of letter from the company, share certificates and the bank account of Union Bank of India from which payment of Rs,20,00,000/- was made vide cheque no.15390 dated 15/03/2011. The shares have been purchased at face value of Rs. 10/- each at Ahmedabad where appellant and the company are based. The purchase of shares are well documented, and payment of Rs.20,00,000/- has been made by cheque, therefore, its genuineness cannot be doubted. Appellant has dematerialised shares with HDFC Bank and held it for three years. Appellant has subsequently sold the shares on BSE when the suspension of trading of the share of the company resumed at the prevailing exchange price ranging from Rs. 150 to Rs. 160 per share in different lot between 23/06/2014 to 11/07/2014 through the broker Shri Pravin Ratilal Share & Stock Brokers Limited. The sale of share is well documented and has been made on the stock exchange at the prevailing market price and consideration has been received in cheque and accounted in the HDPC Bank. The AO has relied on the case of Bombay High Court in the case of Sanjay Bimalc....
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....purchase and sale of shares supported by contract notes, DMAT accounts and account payee cheque cannot be treated as bogus. The Honourable Gujarat High Court in the case of Commissioner of Income Tax - 1 Vs. Maheshchand G. Vakil [140 Taxmann.com 326] has held that where assessee prove genuineness of share transactions by contract notes for sales and purchase, bank statement of broker, DMAT accounts showing transfer in and out of shares as also abstract of transactions furnished by stock exchange, AO is not justified in treating capital gain arising from sale of shares as unexplained cash credit. In the similar case, Honourable Gujarat High Court in the case of Commissioner of Income Tax - 1 Vs. Himani M. Vakil [10 Taxmann.com 326] has held that where assessee duly prove genuineness of share transaction by bringing on record contract notes for sale and purchase, bank statement of broker and DMAT accounts showing transfer in and out of shares, AO was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. In view of the above facts, AO was not justified to make the addition u/s. 68 of the I. T. Act, 1961 of sale proceeds of shares of Rs.2....
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....he rival contentions and perused the material on record. In the case of Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC), the assessee-individual was engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under section 10(38). The Assessing officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature. The Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under section 10(38) of the Act. The High court by impugned order held that no substantial question of law arose from Tribunal's order. The SC dismissed the SLP against said impugned order. In the above case, the Gujarat High Court while passing the order observed as under: 2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gai....
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.... not justified in treating capital gain arising from sale of shares as unexplained cash credit. 7.3 In the case before us, the Assessing Officer has not doubted the purchase of shares were through banking channels. The assessee has placed on record copies of contract memos in connection with purchase and sale of shares. Besides the above shares, the assessee has also held shares of 15 other companies as well. As stated above, the appellant has held the shares for over 3 years and it would be incorrect to treat sale of shares as bogus merely on the basis of suspicion and on account of fact that a substantial quantum of capital gains has been made by the assessee or that the trading in respect fo the said share was suspended for some time on the stock exchange. In the present case, no material has been brought on record to suggest that purchase and sale of shares were bogus. The ld. Assessing Officer has not brought any material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money. In the present case, despite the assessee's specific request, no opportunity of cross examination was pr....
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....nus of controverting the documentary evidences furnished by the assessee and by bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. (iv) The Delhi ITAT in the case of Suresh Kumar Agarwal vs. ACIT, ITA No 8703/Del/2019 held that the assessee has produced contract notes, demat statements etc & discharged the onus of proving that he bought & sold the shares. The AO has only relied upon the report of the investigation wing alleging the transaction to be bogus. The ITAT held that the AO ought to have examined a number of issues (which are enumerated in the order) and shown that the transaction is bogus. The capital gains are genuine and exempt from tax. (v) The Mumbai ITAT in the case of Vijayrattan Balk....