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2021 (12) TMI 1425
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.... 3. From going through grounds of appeals raised by the revenue in the instant appeals we find that common issue relates to genuineness of claim of Long Term Capital Gain u/s 10(38) of the Act for sale of equity shares of listed companies denied by the ld. AO in the case of following assessees: Name of Assessee A.Y. Amount Name of listed Company Deepansu Mohapatra 2014-15 38,00,000/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 62,42,000/- M/s Lifeline Durgs & Pharma Ltd. Himansu Mohapatra 2014-15 39,34,500/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 61,12,000/- M/s Lifeline Durgs & Pharma Ltd. Sitansu Mohapatra 2014-15 61,25,908/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 37,25,000/- M/s Lifeline Durgs & Pharma Ltd. Anupama Mohapatra 2014-15 61,25,908/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 62,58,250/- M/s Lifeline Durgs & Pharma Ltd. Amruta Preetam Mohapatra 2014-15 59,99,250/- M/s Kailash Auto Finance Ltd. (KAFL) Mamta Mohapatra 2014-15 56,73,845/- M/s Kailash Auto Finance Ltd. (KAFL) Kishore Kumar Mohapatra 2014-15 38,82,500/- M/s Kai....
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.... OT entry providers with the sole motive to provide such accommodation entries to enable the beneficiary to convert his undisclosed income to tax free income. Ground No.4: On the facts and in the circumstances of the case, the Ld CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains (L TCG) on sales of shares on the specious ground that the assessee was not qranted an opportunity to cross-examine the persons making adverse statement against the assessee, when facts on record reveal that no such opportunity for cross examination was sought by the assessee before the AO. Moreover, in their statements recorded before the Investigation Wing, Kolkata, (i) Shri Pawan Kumar Kayan, , one of the brokers, (ii) Shri Praveen Kumar Agarwal (iii) Shri Anuj Agarwal, another broker had stated that the shares of Mis Kailash Auto Finance Ltd (KAFL) w~ rigged to generate bogus Long Term Cap~ Gains through accommodation entries. When those statements were confronted to the assessee, he had not been able to controvert the averments made therein, as mentioned in the assessment order. Ground No. 5 : On the facts and in the circumstance....
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....sed return of income and had offered bogus Long Term Capital Gains to tax by paying additional self-assessment tax. In spite of the same, the CIT(A) has erred in holding that the alleged transaction of shares of Mis Kailash Auto Finance Ltd (KAFL) are genuine, when the assessee had suo motto offered the entire alleged L TCG for taxation without claim of exemption u/s 10(38) of the I.T. Act, 1961 by filing revised return of income and paid self-assessment tax thereon after survey u/s 133A of the I.T. Act, 1961 was carried out in this group of cases by the Investigation Wing, Bhubaneswar, based upon the inputs of Investigation Wing, Kolkata. The above action of the CIT(A) violates the ratio of decision of Hon'ble Supreme Court in the case of CIT vs M/s Shelly Products And Another (2003) 261 ITR 367 (SC), wherein it is held that no refund of tax would be granted on the admitted returned income even though the assessment is annulled. Ground No.8. The appellant craves leave to add, alter, amend one or more grounds of appeal before the appeal is heard. 6. The Revenue has raised the following grounds of appeal in ITANo. 43/CTK/2020:- Bogus Long Term Capital Gains ....
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.... the brokers, (ii) Shri Praveen Kumar Agarwal (iii) Shri Anuj Agarwal, another broker had stated that the shares of M/s. Lifeline Drugs & Pharma Ltd. (LD& DL) were rigged to generate bogus Long Term Cap~ Gains through accommodation entries. When those statements were confronted to the assessee, he had not been able to controvert the averments made therein, as mentioned in the assessment order. Ground No. 5 : On the facts and in the circumstances of the case, the Ld.CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains(L TCG) on sale of shares of penny stocks of M/s. Lifeline Drugs & Pharma Ltd. (LD& DL)by merely relying upon a couple of decisions of ITAT Benches, ignoring the following judgments of various High Courts and Tribunals, which are rendered in favour of revenue on the same issue of "Penny Stocks": (a) CIT vs Sanghamitra Bharali (2014) 361 ITR 481 (Gauhati) (b) Sanjay Bimalchand Jain vs. Pr.CIT (2018) 89 taxmann.com 196 (Bombay) (c) Purviben Snehalbhai Panchhigar vs. ACIT (2018) 409 ITR 124(Guj) (d) Udit Kalra vs. ITO, Ward-SO(1) [ITA No.220/2019 of Delhi High Court, date of o....
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....me Court in the case of CIT vs M/s Shelly Products And Another (2003) 261 ITR 367 (SC), wherein it is held that no refund of tax would be granted on the admitted returned income even though the assessment is annulled. Ground No.8. The appellant craves leave to add, alter, amend one or more grounds of appeal before the appeal is heard 7. Brief facts of the case pertaining to A.Y. 2014-15 are that the assessee is an individual earning income from various sources including income from truck plying, income from Long Term Capital Gains (LTCG) and income from other sources. The original return of income for A.Y. 2014-15 was filed on 29.07.2014 disclosing a total income of Rs.4,79,990/- and claimed exemption of LTCG u/s 10(38) of the Act. A survey operation u/s 133A was conducted on the business premises of Shri Kishore Kumar Mohapatra Group on 22.07.2015. During the course of this survey the assessee who is a family member of this group, was confronted with the statements of directors of certain Kolkata based companies whose shares bought and sold in the stock market by assessee. It appears that these Kolkata based companies were under the scanner of the I.T. Department for a....
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....proceedings and proceeded to treat the same as "Income from other Sources". 9. Aggrieved assessee challenged the action of the Ld. AO before Ld. CIT(A) of denying the benefit of exemption u/s 10(38) of the Act, and treating the claim of Long Term Capital Gain as bogus towards LTCG claimed at Rs.38,00,000/- and Rs.62, 42,000/- for A.Y. 2014-15 & 2015-15 from sale of equity shares of M/s Kailash Auto Finance Ltd (KAFL) & M/s. Lifeline Drugs & Pharma Ltd. (LD& DL) respectively. 10. In the appellate proceedings it was submitted by the assessee that the purchase of equity shares in question was made through account payee cheque, shares were held in the Demat Account, equity shared were held for more than 12 months and sold through recognized stock exchange after payment of security of transaction tax. It was also submitted that Ld. AO erred in accepting the revised return for A.Y.201415 and also disregarding the claim of LTCG u/s 10(38) of the Act made for A.Y.2014-15 & 2015-16 during the assessment proceedings without bringing anything contrary on record to prove that the claim was bogus. It was also submitted that the ld. AO merely relied on an investigation report in case of 3r....
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....urvey proceedings carried out on 22.07.2015, the assessee under duress and out of fear filed the revised return not claiming the exemption u/s 10(38) and offering the LTCG for tax. During the assessment proceedings it was stated that the claim is genuine and revised return cannot be accepted since the original return was filed belatedly. Similar for A.Y. 2015-16 in the original return assessee did not claim the benefit of LTCG and paid tax on capital gain, but during the course of assessment proceedings revise computation was filed along with documentary evidences claiming that the assessee deserves the benefit of exemption u/s 10(38) of the Act. Reference was also made to CBDT circular No.286/98/2013 dated 09.01.2014 which strictly debars the Revenue Authorities from obtaining admission/statement during the course of survey rather, insisted on collecting evidences. To support this contention that claims not made in the return can be claimed at the time of assessment for assessing the correct income of the assessee, reliance placed on following decisions: 1. Hon'ble Gujarat High Court in the case of Gopal Bhai Babu Bhai Parikh -vs- Pr. CIT-4, reported in [2021], 127 taxman....
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....also perused the paper book 18(vi) I.T.A.T. Rules from all the parties. 18. First we will take common ground no.1,2,4 & 7 raised by the revenue for A.Y. 2014-15, mainly challenging the action of Ld. CIT(A) of accepting the assessee's claim of exempt long term capital gain from sale of equity shares u/s 10(38) of the Act by way of ignoring the revised return for A.Y.2014-15, by way of accepting revised computation of income for A.Y.201516 even when the assessee has already offered the alleged LTCG to tax and thirdly, for allowing the claim of assessee since no opportunity of cross examination was provided to confront the third party whose statements were used against the assessee. 18.1. We notice that during course of survey, assessee under compulsion and pressure has admitted and paid tax on the exempted LTCG by way of revising returns for Assessment year 2014-15 and declared the exempt capital gain as taxable gain, but subsequently, after examining the fact and law, found that, the admission of exempted income as taxable income and payment of tax on exempted income is wrong. The Assessee retracted from his own admission and vehemently objected before the A.O. that, the i....
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....t. 18.6. Hon'ble Gujarat High Court in the case of Gopal Bhai Babu Bhai Parikh -vs- Pr. CIT-4, reported in [2021], 127 taxman.com 245 (Guj.), have held that, Assessee an employee of a bank, opted for scheme of early voluntary retirement as declared by bank and received a sum of certain amount - He filed his return of income without claiming benefit of exemption under section 10(10C) on said amount- Same was processed under section 143(3) and an Assessment order was passed - In meantime, Supreme Court in a case of another employee of same bank passed a dictum that he was entitled to exemption under section 10(10C) on amount received under early retirement scheme - On basis of same, Assessee filed an application before Commissioner seeking to claim exemption under section 10(10C) - Commissioner disallowed same on ground that Assessee had not claimed exemption during filing of return - Whether even if Assessee had not claimed exemption in his return of income, he could claim same later in point of time-Held, Yes - Whether thus Assessee was to be allowed exemption under section 10(10C) on such amount received from bank under early retirement scheme - Held, Yes. 18.7 Hon'b....
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....ot ignore the evidences blindly relying on the report submitted by the survey team, particularly when, the report so submitted by the survey team is not based on any concrete evidences rather based on the statement of a third party which were even not recorded by the survey team. Further, the learned A.O. relied on the statement of a third party which was recorded by another officer under a different circumstances and particularly when, the Respondent company has no financial relations with the director." 18.10 We also observe that, additions were made by the A.O. without adhering the principles of natural justice which constitutes bedrock in any quasi-judicial proceeding. A.O's reliance on the statement of so called entry operators to justify the additions U/s.68 and 69 of the Act was factually unsustainable, because the statement of entry operators were recorded on various dates connected with some other proceeding and not at all connected with the Appellant proceedings and it is also not known as to what was the condition in which the makers of the statement made the statement and in what context they made the statement. These statements were recorded much before the date....
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.... quasi-judicial proceedings. It should be kept in mind by the A.O. that, his decision must be based upon logical proof or evidence and should not be based on speculation or suspicion or surmises or conjectures, because while discharging the duties as an Assessing officer, he was expected to function both as on Investigator and Adjudicator. In his role as an investigator, he was duty bound to investigate fully and bring out all the facts on record and while discharging the duty as an Adjudicator, he was required to comply with the principles of natural justice. In the instant case, the A.O. failed to perform his twin duties that of the investigator and adjudicator resulting in the additions being vitiated in the process. 18.12 Our view is supported by the judgment of the Hon'ble Apex Court in the case of CIT -vs- Odeon Builders (P) Ltd. reported in 110 Taxman.com 64 (SC) involving similar facts as involved in the present case. In this decided case, the Revenue had disallowed the purchase made by the Assessee holding it to be bogus based on the statement given by a third party. On appeal, the learned CIT(A) deleted the addition holding that, on one hand, the Assessee has discharge....
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....link the Assessee with any wrong doing. When the learned CIT(A) found that, the A.O. has not followed the due procedure of law as stated in the above paragraph, he rightly deleted the impugned additions. 18.15 We, therefore, in view of our above discussion and settled judicial precedents that assessee should be assessed for the correct income and ignorance if any made by the assessee in filing the return but brought to the notice of the Ld. AO before the conclusion of the assessment proceedings should be entertained and also as per the principle of natural justice if any addition is made on the basis of statement of 3rd party, a proper opportunity of cross examination should be given to the affected party and if the same is not done, action of the Ld. AO making additions cannot be held to be justified. We, therefore, dismiss revenues common ground no.1,2,4 & 7 raised for A.Y.2014-15 & 2015-16 in the instant appeals. 19. Now we take up common ground no.3 & 6 raised on merits of the case. To keep the facts straight we notice that the assessee purchased the equity shares by making payment through banking channel. Subsequent to certain merger and split of equity shares assessee h....
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.... share of Rs.10/- face value were converted into Re.1 per share and thus the appellant's holding as on 05.12.2013 was as under: Kailash Auto Finance Ltd 100000 shares Lifeline Drugs & Pharma Ltd. 25,000 shares Newever Tradewin 10,000 shares Shagun Trexin 1,000 shares 19.2 During the year under consideration the appellant sold the entire 25,000 shares of Lifeline Drugs and Pharma Ltd. as under: No. of shares date of sale value received 3000 17.07.2014 7,44,000 3,000 18.07.2014 7,56,000 2,000 21.07.2014 5,03,000 3,000 23.07.2014 7,53,000 3,000 07.08.2014 7,53,000 1,000 08.08.2014 2,49,000 7,000 07.10.2014 17,43,000 3,000 07.11.2014 7,41,000 25,000 62,42,000 19.3 After deduction the cost price of Rs.50,000/- and other expenses including STT the Net Long Term Capital Gains was computed at Rs.61,59,697/-. 19.4 All the above details of purchase and sales were placed before the ld. AO along with contract notice for purchase and sale, Demat Account and Bank statement and Ld. AO could not find any mistake or defect in these documents. Action of the Ld. ....
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.... the LT Act, 1961. From the submissions of the assessee, it is seen that the assessee purchased 1,00,000/- shares of M/s. Panchashul Marketing Ltd for Rs.1,00,000/-, each share Rs.1/-, on 21/11/2012. These shares were purchased through Jatadhari Marketing (P) Ltd. and the purchase amount was paid by cheque no. 510691 drawn against the assessee's savings bank account no. 30160100001797 with the Bank of Baroda, Bhadrak. The shares of Panchashul Marketing Ltd. were subsequently merged with that of M/s. Kailash Auto Finance Ltd. (KAFL). The assessee also purchased share of another company, namely Drugs and Pharma Pvt. Ltd. on 24/05/2012. Subsequently, the shares of M/s. KAFL and M/s. Lifeline Drugs were sold by the assessee through SEBI authorized brokers, M/s. Destiny Securities Ltd (SEBI Registration no. INB011241834) and M/s. Motilal Oswal Securities Ltd. on 05/02/2014, 06/02/2014 and 24/03/2014 for Rs. 37,96,200/-. The amount received after payment of Security Transaction Tax (STT) and brokerage was Rs. 37,91,465/-. This amount was received by the assessee through Savings Bank account no. 30160100001797 with Bank of Baroda, Bhadrak on 13/02/2014 and 24/03/2014 and the assessee,....
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....ors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might to against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee." The enquiry by the Investigation wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did bt implicate the assessee and/or his broker. It is alSlJ' a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demand statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AD to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AD was not justifi....
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....then it follows that the share price of which has been sold for genuine quoted price and therefore} the sale proceeds has to be reckoned from sale of such shares and would be treated as explained credit or investment. Accordingly, on the facts and circumstances of the case) we hold that the long term capital gain shown by the assessee is genuine and consequently liable for exemption u/s. 10(38). Thus} appeal of the assessee is allowed. 11 In the light of the foregoing observations, it is held that the AO was not justified in rejecting the claim of exemption u/s. 10(38) in respect of LTCG arising on the sale of shares of M/s. Kailash Auto Finance Ltd (KAFL) and M/s. Lifeline Drugs. The consideration received by the assessee was out of the sale of shares effected on a recognized stock exchange. The shares had been held for a period of more than twelve months and securities transaction tax (STT) had been paid at the time of the transfer. Hence, the amount received by the assessee is undeniably in the nature of a long term capital gain (L TCG). The AO's action was based entirely on surmises and suspicions and at the same time. the AD was unable to rebut the concrete e....
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.... on long term capital gains without seeking an exemption u/s. 10(38) of the LT Act, 1961. A copy of the said letter dt. 09/10/2015 addressed to the Add. Director (Investigation), Bhubaneswar was produced in the main assessee company had agreed to pay tax on the long term capital gains during the course of the survey u/s. 133A that was conducted on the assessee's premises on 22/07/2015. On page 3 of his assessment order, the AO states that the assessee, Shri Himanshu Mohapatra in a recorded statement u/s. 133A given to the survey authorities, had admitted to the fact of taking accommodation entries from certain Kolkata based companies. On the basis of these 'admissions' by the assessee, the AO concluded that the bogus nature of the long term capital gains had been established beyond doubt and, consequently, proceeded to make the disallowance. Now, unlike section 132(4) which treats the statements recorded during a search operation as 'evidence' in any proceeding under the ~ Act, 1961, section 133A, while authorizing recording statements by the survey officer, does not give the same status of 'evidence' to such recorded statements. It is therefore....
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....; 9,88,000 2,000 06.06.2014 4,96,000 9.000 08.08.2014 22,41,000 15.000 37.25.000 After deducting the proportionate cost price of Rs.30,000/- and other expenses including STT the Net Long Term Capital Gains was computed at Rs.36,76,819/- and the same was claimed an exempt u/s. 10(38). The order of the Hon'ble Income Tax Appellate Tribunal, "A" Bench, Kolkata in the cases of Shri Manish Kumar Baid V [s ACIT, Cirlce35, Kolkata (ITA No.1236/Kolj2017 for 2014-15) and Shri Mahendra Kumar Baid V /s ACIT, Circle-35, Kolkata (ITA. No. 1237/Kolj2017 for AY.- 2014-15) has also been perused by me. The ground of appeal raised before the ITAT, Kolkata is identical to the issue being contested in the case before the undersigned and is being reproduced herewith-: "For that under the facts and in the circumstances of the case the Income as determined under head other sources at Rs. 38,00,000/- should have been treated as income from Long Term Capital Gains out of dealing in shares and the learned AD should have allowed exemption u/s. 10(38) as claimed."....
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....resulting in LTCG. These evidences were neither found by the ld AD to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AD was not justified in rejecting the assessee's claim of exemption under section 10(38) of the Act. We also find that the various case laws of Hon'ble jurisdictional High Court relied upon by the ld AR and finding given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AD was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s. 68 of the Act.' The ITAT, Delhi Bench "SMC", New Delhi adjudicated on an identical issue in the case of Vidhi Malhotra v /s ITO, Ward-2(S), Faridabad (ITA No. 93/Del/2018 for AY.-2014-15 and Santosh Mendiratta vIs. ITO, Ward-2(3), Faridabad (ITA No. 94/Del/2018 for AY.- 2014-15). In both these appeals, the assessee's had claimed exemption u/s. 10(38) on the LTCG in respect of sale of shares of Mis. ....
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....he time of the transfer. Hence, the amount received by the assessee is undeniably in the nature of a long term capital gain (L TCG). The AO's action was based entirely on surmises and suspicions and at the same time. the AD was unable to rebut the concrete evidence tendered by the assessee in support of his claim. Further, the prevailing weight of judicial opinion is heavily in the assessee's favour as adduced by the decision of the Hon'ble Kolkata and Delhi Bench of the I.T.A.T. where the issue adjudicated was identical to the facts in the assessee's case. Hence the addition of Rs.62,42,000/- made by the AO is hereby deleted and the assessee's appeal is upheld. 19.5 The above finding of Ld. CIT(A) is well supported by various decisions and judgments which commonly states that if the assessee fulfills all the relevant conditions to claim the benefit of exemption of LTCG on sale of listed equity shares u/s 10(38) of the Act and the assessee is not found to be part of the alleged group of accommodation entry providers then the claim made for exempt income u/s 10(38) of the Act should not be denied. 19.6 Similar view was also taken by Coordinate Bench Mumbai, The rel....
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....ises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. We find that the ld. CIT(A) has also referred to SEBI enquiry against the M/s Anand Rathi Share and Stock Brokers Ltd. However, we note that the said enquiry was regarding financial irregularities and use of fund belonging to the clients for the purpose other than, the purchase of shares on behalf of the clients. Therefore, the subject matter of the enquiry has no connection with the transaction of bogus long term capital gain. The decisions replied upon the ld. DR in case of Sanjay Bimalchand Jain vs. Pr. CIT (supra) is not applicable in the facts of the present case as the said decision is in respect penny stock purchase by the assessee from a persons who was found to be indulged in providing bogus capital gain entries whereas in the case of the assessee the shares were allotted to the assessee by the company at par of face value. Hence, in view of the facts and circumstances when we hold that the order of the Assessing Officer treating the long term capital gain as bogus and consequential addition made to the total income of the assessee is n....
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....prove any connection with the assessee nor the assessee's involvement or connection or collusion with the brokers, exit providers, accommodation providers or companies or directions etc and for making the addition, it is necessary to bring on record evidence to establish ingenuity in transactions or any connection of the assessee or its transaction with any of the alleged parties. In the instant case, as we have discussed earlier, there is no finding which proves assessee's connection, involvement or collusion with so called accommodation entry providers. Further in the aforesaid case, the issue as to whether the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities,' human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim is genuine or not has been discussed at length. And referring to legal proposition laid down by the Hon'ble Supreme Court that the burden of proving a transaction to be bogus has to be strictly di....
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....f the Hon'ble jurisdictional High Court and of that of the Coordinate Benches in cases referred supra, we are of the considered view that the assessee has discharged the necessary onus cast on him in terms of claim of exemption of long term capital gains u/s 10(38) of the Act by establishing the genuineness of transaction of purchase and sale of shares and satisfying the requisite conditions specified therein and the gains so arising on sale of shares therefore has been rightly claimed as exempt u/s 10(38) of the Act. Accordingly, in the facts and circumstances of the case, we set-aside the order of the Id. CIT(Appeals) and the claim of the assessee u/s 10(38) is allowed. The matter is thus decided in favour of the assessee and against the Revenue. In the result, the ground of appeal so taken by the assessee is allowed. 26. In the result, the appeal of the assessee is allowed." 20. We have also observed that the above referred decision of Coordinate Bench of Mumbai and Jaipur has dealt in the issue of relating Long Term Capital Gain eared from sale of equity shares of M/s SAL holding it to be a genuine gain and in this context we also note that in the case of ....
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....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, atleast 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 held as follows: "A....
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....ts reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 22. As regards the judgment of Hon'ble Delhi High Court in the case of Suman Poddar V/s ITO (supra) delivered on 17.09.2019 relied by Ld. Departmental Representative, we find that Hon'ble High Court of Delhi in its recent judgment dated 15.1.2021 in the case of PCIT V/s Krishna Devi & Others ITA No.125/2020 dealing with the similar issue of claim of exemption u/s 10(38) of the Act for Long Term Capital Gain from sale of equity shares has duly considered the judgment of Hon'ble Delhi High Court in the case of Suman Poddar V/s ITO (supra) and has decided against the revenue confirming the order of the Tribunal stating it to be the last fact finding authority who on the basis of evidence brought on record has rightly came to the conclusion that ....
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....as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking c....
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.... 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed. 23. We therefore in the light of above judgments which are squarely applicable in the issues raised in the instant appeals are of the considered view that the claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock ex....
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....purchased one lac equity shares of JMD Telefilms Industries Ltd. of a face value of Rs.10/- each at a premium of Rs. 7/- per share i.e for a total consideration of Rs. 17 lac by way of a preferential allotment in physical form. The payment of the purchase consideration of Rs. 17 lac was made by the assessee vide account payee Cheque no. 168253, dated 15.01.2009 drawn on his Saving Bank A/c No. 06130100003249 with Bank of Baroad, Branch: Mittal Tower, Nariman Point, Mumbai in favour of JMD Telefilms Industries Ltd. Our attention was drawn by the ld. A.R to the copy of the share application form, copy of the bank account a/w the copy of the cheque vide which payment of the purchase consideration of the aforementioned shares was made. Also, the assessee had filed before the lower authorities the copy of the share allotment letter and share certificate as regards allotment of one lac shares bearing distinctive nos. 3214601 to 3314600. On 30.06.2009 the one lac shares were dematerailzed by the assessee via Motilal Oswal Securities. Thereafter, the aforesaid shares were split in the ratio of 10:1 and the assesee had 10 lac shares. Out of the 10 lac shares the assesee had in March, 2010 i....
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....ties who are not connected with the assessee. Insofar the third party statements relied upon by the A.O are concerned, the same, as observed by us hereinabove, do not raise any allegation qua the authenticity of the transactions of purchase/sale of shares of JMD Telefilms Industries Ltd. by the assessee. Also, the A.O instead of disproving the contents of the aforesaid documentary evidence that were filed by the assessee in support of his claim of having made genuine purchase/sale of shares in question, had rather in disregard of the same chosen to remain guided by assumptions, presumptions, surmises and principles of preponderance of human probabilities. Insofar the observation of the A.O that the statement of the assessee recorded u/s 131 of the Act in the course of the assessment proceedings revealed, viz. that the assessee had no understanding of the company in which he had claimed to have made the investment; that the assessee had never in the past invested as a preferential share allottee; that the assessee did not understand the meaning of preferential allotment and stock split; and that the assessee had invested only in a few shares besides M/s JMD Telefilms Industries Ltd.....
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....ve evaded taxes and laundered his unaccounted money by booking a bogus claim of LTCG that is exempt u/s 10(38) of the Act. Although, the A.O had at length discussed in his order the information that was shared with him by the Investigation wing of Kolkata i.e the modus operandi adopted by beneficiaries with the help of entry operators to obtain tax free capital gains, however, we are afraid that nothing concrete has been brought on record which would prove to the hilt the falsity of the assessee's claim of having carried out genuine transactions of purchase/sale of shares under consideration, and therein prove that he in the garb of a bogus transaction had only procured a bogus entry of capital gain. On the contrary, we find that the assessee had duly substantiated the purchase of shares under consideration on the basis of supporting documentary evidence. Admittedly, the assessee had paid for the purchase consideration of the shares to the company, viz. JMD Telefilms Industries Ltd. through account payee cheque, and the said fact had duly been substantiated by him by placing on record the copy of the cheque a/w copy of his bank account reflecting the said transaction. Further, ....
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....remains his sole prerogative and cannot be interfered with by the department. Insofar the invoking of the principle of preponderance of human probability is concerned, the same, in our considered view would come into play after disproving and dislodging to the hilt the documentary evidence that had been placed on record by the assessee to substantiate the genuineness of the transaction of purchase/sale of shares in question. Our aforesaid view that in the absence of any evidence, whatsoever, to allege that money had changed hands between the assessee and the broker or any other person, or that some person provided the entry to convert unaccounted money for getting benefit of LTCG, the unsubstantiated claim of the department that the assesseee had taken recourse to a structured transaction for evading his taxes and laundering his unaccounted money in the garb of exempt LTCG u/s 10(38) of the Act, cannot be accepted, is supported by the judgment of the Hon'ble High Court of Delhi in the case of Pr. CIT & Ors. Vs. Krishna Devi & Ors. (2021) 110 CCH 9 (Del). In its aforesaid order it was observed by the Hon'ble High Court, as under : 11. On a perusal of the record, it ....
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....terial on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjectures made by the AO. This flawed approach forms the reason for the learned....
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.... 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 the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue." Also, a similar view had been taken by the Hon'ble High Court of Bombay in the case of CIT Vs. Shyam R. Pawar (2015) 229 Taxman 256 (Bom). In its aforesaid judgment, the Hon'ble High Court referring to the facts of the case before them observed, that while for the department had extensively referred to the correspondence and the contents of the report of the Investigation, what was however important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. It was observed by the Hon'ble High Court, that if the purchase and sale of ....