TaxTMI 
TaxTMI 
2022 (2) TMI 1342
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....ppeals) has erred in confirming the action of the Assessing Officer of making an addition, being disallowance of claim of exempted long term capital gain on sale of shares of Ms. Shree Shaleen Textiles Ltd.[(SHRSH TEX) and treating it as unexplained credits u/s. 68 of the Act. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition of Rs. 31,33,677/- on account of disallowance of the claim of exempted long term capital gain on sale of shares of M/s. Shree Shaleen Textiles Ltd. (SHRSHTA TEX) and treating it as unexplained credits u/s. 68 of the Act. 2. It is therefore prayed that the above addition made by assessing Officer and confirmed by learned Commissioner of Income-tax (Appeals) may please be deleted. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal. 3. The relevant facts, in short, are that the assessee filed her return of income for the year under consideration on 30-03-2015 declaring a taxable income of Rs. 5,51,050/- only. The assessee had purchased 500 shares of Shree Sh....
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....s by investigation wing of the department because rates on these shares are not based on business results of the company but the same is fluctuated by insider trading. (v) Statements of brokers, operators, directors of paper companies who has bought these shares, directors of Penny stock companies, all confess to such a scheme with detailed modus operandi which tallies with actual transactions. The assessee is one such beneficiary who has taken entry of LTCG. vi) Exactly similar entries have been taken by other family members of the assessee in the form of Exempted Long Term Capital Gain and the total bogus LTCG so claimed by assessee, and his family members comes to Rs. 1,55,93,391/- from actual investment of Rs.1,32,401/-. A quick analysis of the above figure shows abnormal return from a very small investment within a span of one to two years, which is quite impossible in normal share trading. 5. While passing the order, the Ld. Assessing Officer observed certain facts as detailed under:- "7. As per information available with the office, it is learnt that surveys and search actions were carried out at Kolkata, Mumbai and Delhi on entry operators who ....
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.... and more than 20 Entry operators. Out of the Investigation of such high magnitude, the investigation wing have unearthed and identified some 84 odd companies which are listed on Bombay Stock Exchange and are being used for providing bogus accommodation entry of Long Term Capital Gain/Short Term Capital Loss. List of such company identified by the Department includes the following scrip in which you have traded and shown Long Term Capital Gain as per the details below:- Script Code Script Name Full name of penny stock Amount of total trade value SEBI Action 50551 3 SHRSHA TEX Shree Shaleen Textiles Ltd 502. 16CRORE Suspended In view of the above, the AO treated the long term capital gain declared by the assessee as unexplained cash credit under section 68 of the Act. 6. Aggrieved, the assessee preferred an appeal before Ld. CIT(A) who confirmed the order of the AO 7. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 8. The Ld. Authorized Representative before us submitted as under:- (i) In the course of assessment proceedings, the assessee filed various documents of purchase and sale which prove t....
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....case of the department. (vi) The assessee has proved that the purchases and sales are genuine and, therefore, in view of the Hon'ble Gujarat High Court decision in the case of CIT vs. Mahesh Chandra G. Vakil (2013) 40 taxmann.com 326 (Guj) capital gain on sale of shares should not be taxed u/s 68 of the I.T. Act. Reliance was also placed on the latest decision of Nishant Kantilal Patel(2013-14/5/SRT/2019) vide order dated 07.01.2021 of Surat Bench of ITAT on the same facts. It was requested that based on facts of the case, appeal may kindly be allowed. The assessee submitted that the Assessing Officer has not been able to prove the existence of modus operandi as discussed by him in the assessment order. Since the Assessing Officer has not been able to prove that the cash was actually deposited in those accounts before the issue of the cheque for the sale price, it cannot be said that assessee has followed the modus operandi discussed by the Assessing Officer or CIT(A). Moreover, the Assessing Officer or CIT(A) have not allowed the opportunity of cross examination of Shri Akash Agrawal or Sawan Kumar Jaju. Therefore, this statement cannot be relied upon. 9. On the other ....
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....rcumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned....
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....nces 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 addition is a 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 that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. 16. 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. He 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. 17. The Mumbai ITAT in the case of Vijayrattan Balkrishan Mittal vs. DCIT, ITA No.3311/Mum/2019 he....
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....of the statement was supplied to the assessee. nor any opportunity of cross-examination was given by the Assessing Officer/CIT(A). The Hon'ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:- "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee wa....
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....aid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed In/ the Tribunal and allow this appeal." 16. On the strength of the aforementioned decision of the Hon'ble Supreme Court, the assessment order has to be quashed. 19. For the sake of the completeness of the adjudication, even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer in the name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never h....
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....ah, rendered in Tax Appeal No.674 of 2017, to submit that in an appeal arising out of the common order of the Tribunal, raising identical questions, this court has dismissed the appeal and upheld the order passed by the Tribunal. It was submitted that therefore, for the same reasons, this appeal also deserves to be dismissed. 4. Mrs. Mauna Bhatt, learned senior standing counsel for the revenue, is not in a position to dispute the aforesaid position of law. 5. Having regard to the fact that the controversy involved in the present case stands concluded by the above referred decision of this court, it is not necessary to set out the facts and contentions in detail. For the reasons recorded in the order dated 12.9.2017 passed by this court in Tax Appeal No.674 of 2017, it cannot be said that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise any question of law, much less, a substantial question of law as proposed or otherwise. The appeal, therefore, fails and is, accordingly, summarily dismissed." 22. The facts of the case on hand are exactly identical to the facts as discussed above. Therefore, the principles laid ....
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....e findings for the ITA No. 2131/AHD/2018 shall also be applied for the appeal on hand i.e. ITA No. 2132/Ahd/2018. Hence, the ground of appeal filed by the Assessee is hereby allowed. 15. In the result, the appeal filed by the assessee is allowed. Coming to ITA No. 2133/Ahd/2018 an appeal by the assessee Shri Parasmal B. Kanugo (HUF) 16. The assessee has raised following grounds of appeal 1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer of making an addition, being disallowance of claim of exempted long term capital gain on sale of shares of Ms. Shree Shaleen Textiles Ltd. (SHRSH TEX) and treating it as unexplained credits u/s. 68 of the Act. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in sustaining the addition of Rs. 30,96,641/- on account of disallowance of the claim of exempted long term capital gain on sale of shares of M/s. Shree Shaleen Textiles Ltd. (SHRSHTA TEX) and treating it as unexplained credits u/s. 68 of the Act. ....