AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 459
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....ng Long Term Capital Gain by Accommodation Entry, denied the claim of exemption u/s. 10(38) of the Act. The CIT(A) confirmed the same. Aggrieved by the order of CIT(A), NFAC, Delhi, the assessee is before us. 3. Ground No. 1 raised by the assessee challenging the action of CIT(A) in confirming the disallowance of exemption claimed u/s. 10(38) of the Act. 4. The ld. AR, Shri Hari Krishan submits that the addition made by the AO and as confirmed by the CIT(A), NFAC, Delhi is in violation of principles of natural justice. The said two authorities denied the exemption on the basis of reports of Kolkata and Bangalore Investigation wings and also order of SEBI in the case of M/s. NCL Research & Financial Services Ltd. He argued that both the authorities below did not confront the reports of Kolkata and Bangalore Investigation wings with the assessee. He vehemently argued that the order passed by the CIT(A) is vitiated and unsustainable in law for non-confrontation of the said reports with the assessee. He drew our attention for not placing the same before this Tribunal by the ld. DR. He submits that the M/s. NCL Research & Financial Services Ltd. was indulged in share price manipulatio....
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....rts concerning third party. 7. The ld. DR, Shri Ramnath P. Murkunde drew our attention to the order dated 22-11-2022 in the case of Abhishek Ashok Lohade (supra) and argued that the issue raised in the present appeal is similar to the issue in the said case on same identical facts. The Tribunal considered every issue in detail including report of Kolkata Investigation Directorate and the arguments made by the ld. AR on fraud. He contended though it is ex-parte of assessee, this Tribunal by following the decision of Hon'ble Supreme Court in the case of Friends Trading Co. in Civil Appeal No. 5608of 2011 confirmed the order of CIT(A) in denying exemption u/s. 10(38) of the Act. The ld. DR vehemently placed reliance on the said order. Further, he drew our attention in the case of S.P. Chengalavaraya Naidu (supra) and Smt. Badami (Deceased) By her L.R. in Civil Appeal No. 1723 of 2008 (SC) and argued that the case of the assessee is covered by this judgment of Hon'ble Supreme Court and supported the order of CIT(A) in denying claim of exemption of Long Term Capital Gains. 8. Heard both the parties and perused the material available on record. Regarding the decision of Hon'ble Supreme....
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....eld. 8. We heard the ld. Sr. DR and perused the material on record. The issue in the present appeal relates to whether or not the claim for exemption of capital gains u/s 10(38) of the Act is genuine. The material facts to be noted herein are as under : During the course of assessment proceedings, the Assessing Officer noticed that the appellant had indulged in suspicious "suspicious transaction relating to long term capital gains on sale of shares" and relating to claim of appellant for exemption of Rs.51,32,174/- u/s 10(38) and sale of shares of M/s SRK Industries Limited. The appellant purchased 6500 shares of Transcend Commerce Limited (hereinafter TCL) @ Rs.10 per share for an amount of Rs.65,000/- on 29.10.2012 from Shubhmangal Sales Pvt. Ltd, which is Kolkata based broker. The bill does not bear any serial number, SEBI approval number and registration number of the broker, (page no. 26 of the Paper book dated 19.12.2017). The payment of Rs.65,000/- was made on 29.10.2012 from IDBI Bank A/c. The TCL subsequently amalgamated with M/s SRK Limited (herein after SRK) and the appellant was issued 14430 shares of SRK Ltd. on 22.03.2013. The company further sub divided the equ....
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....the action of the Assessing Officer is under challenge before us contenting that the appellant had discharged the onus of proving the genuineness of transactions of capital gains in respect of exemption u/s 10(38) of the Act. In a case involving identical facts of the case, the Hon'ble Calcutta High Court after making reference to the decisions of Hon'ble Madras High Court in the case of CIT vs. Manish D. Jain, 120 taxmann.com 180 (Mad.) and PCIT vs. Prabha Jain, 439 ITR 304 (Mad.) had confirmed the action of the Assessing Officer by holding that the Assessing Officer had cogently brought out the factual scenario to establish machinations of fraudulent, manipulative and deceptive dealings and how the stock exchanges system was misused to generate bogus LTCG. 9. There is yet one more reason as to why we are inclined to confirm the addition made by Assessing Officer, in view of the well settled principle of law that fraud vitiate everything and even principle of natural justice have no application and such transaction is void ab initio. The Hon'ble Supreme Court in the case of Friends Trading Co. vs. Union of India in Civil Appeal No.5608 of 2011 vide order dated 23.09.2022 held i....
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..... The aforesaid principle has been reiterated in Roshan Deen v. Preeti Lal [AIR 2002 SC 33], Ram Preeti Yadav v. U. P. Board of High School and Intermediate Education and other [(2003) 8 SC 311] and Ram Chandra Singh v. Savitri Devi and others [(2003) 8 SCC 319]. 23. In State of Andhra Pradesh and another v. T. Suryachandra Rao [AIR 2005 SC 3110] after referring to the earlier decision this court observed as follows:- "In Lazaurs Estate Ltd. v. Beasley [(1956) 1 QB 702] Lord Denning observed at pages 712 & 713, "No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." In the same judgment Lord Parker LJ observed that fraud vitiates all transactions known to the law of however high a degree of solemnity. " 24. Yet in another decision Hamza Haji v. State of Kerala & Anr. [AIR 2006 SC 3028] it has been held that no court will allow itself to be used as an instrument of fraud and no court, by way of rule of evidence and procedure, can allow its eyes to be closed to the fact it is being used as an instrument of fraud. The basic principle is that a party who secures the judgment by taking recourse to fra....
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....g term capital gain. As it appears from para 9 of the assessment order that the Investigation Wing surveyed SMC global securities Ltd. and the concerned person of the said entity accepted their role in providing Accommodation Entry on syndicate. Further, the SEBI which is a premier regulatory body of share market directed BSE to suspend trading of 28 penny stock companies amongst which NCL Research & finance Ltd. is one, which is evident from page 11 of the A.O's order therefore, the A.O discussed the issue in detail like that of report of Investigation wing, statement of concerned person who provided accommodation entry. The order of SEBI in suspending penny stock of those companies, who involved in ragging of prices of penny stocks companies. Therefore, we find the facts and circumstances in the present case are similar and identical to the facts in the case of Abhishek Ashok Lohade (supra), we find the order of CIT(A) is justified and in confirming the order of AO in denying exemption u/s. 10(38) of the Act. Thus, ground No. 1 raised by the assessee is dismissed. 11. Ground No. 2 raised by the assessee is with regard to addition made on account of entry of interest in Form No. ....