TaxTMI 
TaxTMI 
2023 (5) TMI 851
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....essee. This was done by M/s LKP Securities Pvt. Ltd.. The shares were in the demat form and in the demat account of the assessee. The shares of M/s Panchshul Marketing Ltd. had been purchased by the assessee from M/s Brijdhara Mercantile Pvt. Ltd. The purchase of shares of M/s Panchshul Marketing Ltd. was an off-market purchase. It was the submission that subsequently the shares of M/s Kailash Auto were sold on various dates i.e. from 18.02.2014 to 06.03.2014 at an average price of about Rs.38/- per share. The assessee had consequently disclosed Rs.38 lakhs received by the assessee as exempt u/s.10(38) of the Act. The shares were sold through Inter Connected Stock Exchange of India Ltd. and STT (Securitisation Transaction Tax) had also been paid. The Inter Connected Stock Exchange of India Ltd. had sold the shares through BSE. It was the submission that under identical circumstances, the coordinate bench of the Tribunal in the case of Deepansu Mohapatra & Others in ITA Nos.42&43/CTK/2020 along with other connected appeals, vide order dated 21.12.2021 had following the various decisions of the Hon'ble High Courts, held that the assessee, having purchased the equity shares through ac....
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....nt of consideration by cheque and therefore, it is not a case of payment of consideration by in cash. But the transaction is established from the evidence and record which ITA No.1228/M/2018 Mr. Ramprasad Agarwal cannot be manipulated as all the entries are part of the bank account of the assessee and the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. Therefore, the holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises 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 Sanja....
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....hat the said enquiry was regarding failure to comply with certain disclosure requirements and therefore, the subject matter of the enquiry has no connection with the transaction of bogus long term capital gain and has no bearing in judging the genuineness of the transaction undertaken by the assessee or for that matter, the price and realization on sale of shares so undertaken by the assessee through the stock exchange. Further, it has been held in the aforesaid case that the findings of investigation & modus operandi in other cases narrated by the AO and also CIT(A) nowhere 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 w....
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....y. Hence the delivery of shares a/so stand proved. The AO has not brought any material on record to show that the assessee was part of fraudulent price rigging. Accordingly, in the absence of any evidence to implicate the assessee or to prove that the transactions are bogus I am of the view that the capital gains declared by the assessee cannot be doubted with. In that View of the matter the addition made towards expenses is not also sustainable. 25. In light of above discussions and in the entirety of facts and circumstances of the case and following the decisions of 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.....
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....considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, 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 circumstance....
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.... in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its 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 fi....
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....rroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity 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 ....
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....nstrated 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. 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 appeal....
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..../2019 are allowed. 19.8. Recently coordinate Bench Mumbai in the case Kamlesh Gupta vs. DCIT ITANo.1462/Mum/2020 dated 25.11.2021, the relevant finding of this case reads as follows: 11. We shall now advert to the documentary evidence/material that was placed on record by the assessee in order to drive home his claim of having carried out genuine transactions of purchase/sale of shares of JMD Telefilms Industries Ltd. As is discernible from the orders of the lower authorities, we find that the assessee had on 26.02.2009 by way of an off-market transaction 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 a....
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....mp duty charge etc. As is discernible from the orders of the lower authorities, we find that neither of them had dislodged the authenticity of the aforesaid documentary evidence that was filed by the assessee to support his claim of having carried out genuine transactions of purchase/sale of shares of JMD Telefilms Industries Ltd. 12. As stated by the ld. A.R, and rightly so, the observations of the A.O are found to be more or less backed by information received by him from the Directorate of Investigation, Kolkata and the unsubstantiated statements of third parties 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 ....
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....td., i.e by 19 times in 8 months i.e from Rs. 7.93 in October, 2008 to Rs. 145 in June, 2009, which trade pattern of the aforesaid company as per the A.O did not move along with the commercial principles and market factors; and the financials of the company also did not show any reason for the extraordinary performance of its stock. In our considered view, though the aforesaid data gathered by the A.O being based on the facts cannot be faulted on our part, but we are unable to persuade ourselves to concur with him that for the said reason the assessee is to be held to have 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 ....
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....ars; that why did the assessee not invest the surplus funds in the any of the companies in which he was a director and had invested the same in a company whose antecedents were not even known to him, are observations wherein the CIT(A) had tried to put himself in the arm chair of the assessee and indirectly had called for an explanation as to why the investments were not made by him or; if they were so made, then, why they were not made in a desired manner. At this stage, we may herein observe that the prudence of the assessee qua the manner of making of investments 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 e....
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....payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity 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....
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....hat 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 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 ....
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....f a tax exempt LTCG u/s 10(38) of the Act, laundered his unaccounted money, the assessee's duly substantiated claim of having carried out genuine transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. which is duly supported by him on the basis of documentary evidence, could not have been dislodged. Accordingly, for the reasons discussed at length by hereinabove, not finding favour with the view taken by the lower authorities, we herein set-aside the orders of the lower authorities qua treating the transaction of purchase/sale of shares of JMD Telefilms Industries Ltd. by the assessee as a bogus transaction and, consequently vacate the addition made by the A.O under Sec. 68 of Rs. 6,06,49,780/-. The Grounds of appeal Nos. 2 & 3 are allowed in terms of our aforesaid observations. 19.9 We, therefore, respectfully following the above judicial precedence and discussion made hereinabove are satisfied that the assessee has fulfilled necessary conditions to claim the exemption u/s 10(38) of the Act for the Long Term Capital Gain earned from sale of equity shares of M/s Kailash Auto Finance Ltd. and M/s Lifeline Drugs & Pharma Ltd. Therefore, we hold that the asse....
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.... the burden. Regarding the failure to accord the opportunity of cross examination, we rely on the judgment of Prem Castings Pvt. Ltd. 8.... No question of law, therefore arises in the present case and the consistent finding of fact returned against the Appellant are based on evidence on record. b. Pooja Ajmani v. ITO (ITA no. 5714/DEL/2018 dt. 25/04/2019) 5.... AO... concluded that the modus operandi adopted by the assessee followed the pattern discovered by the Investigation wing during various search and survey operations.... apart from being based on evidences gathered during search and survey operations, analysis of the material on record and analysis of information from various sources, the findings of the Assessing Officer are also based on strong surrounding circumstances, preponderance of probability and human conduct in the light of detailed analysis of the modus operandi adopted by brokers and operators engaged in the business of providing entries of long term capital gains to the interested beneficiaries which has come to surface as a result of deep and wide investigation. ... investment in a company of unknown credentials and subsequent jump i....
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.... claim. If the onus is discharged by him and a case is made out, the onus shifts on to deponent. It is pertinent to mention here that the phrase "burden of proof" is used in two distinct meanings in the law of evidence viz, 'the burden of establishing a case', and 'the burden of introducing evidence'. The burden of establishing a case remains throughout trial where it was originally placed, it never shifts. The burden of evidence may shift constantly as evidence is introduced by one side or the others. In this case, once the evidence that assessee has claimed bogus long term capital gain was introduced by the Assessing Officer, the burden of evidence shifted to the assessee. During the assessment proceeding and ever during the assessee proceeding, the assessee has failed to produce any evidence to prove that the long term capital gain claimed by her was genuine. In the present case, it is seen that the assessee has failed to discharge her burden of proof and the Assessing Officer, on the other hand, has proved that the claim of the appellant was incorrect. ... The statement of brokers engaged in providing bogus long term capital gains clearly proves that Kappac Phar....
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....onestly without resorting to subterfuges." 5.3 Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement- must be real and genuine and not a sham or make believe. 5.4 Keeping in view of the aforesaid discussions, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions...I further find that the share transactions leading to long term capital gains by the assessee are sham transaction entered into for the purpose of evading tax. I note that the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Co. Ltd. (supra) is squarely applicable in this case c. Anip, Anju Rastogi v. ITO, W 1(1), Meerut ITA No. 3809, 3810/DEL/2018. „...regarding the statement of Sh. Jai Kishan Poddar the assessee has only stated that in the statement there is no specific link with the claim of exemption in respect of Long Term Capital Gain of Rs. 22,78,172/- u/s. 10(38) by him. He has not stated a thing with respect to the statement of Sh. Jai Kishan Poddar in which he has accepte....
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....failed to substantiate the genuineness of alleged share transactions in respect of long term capital gain u/s. 10(38) of the Act. In view of above discussions, the landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 are squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning...‟ d. Satish Kishore v. ITO, W-47(2), New Delhi [2019] 110 taxmann.com 307 (Delhi - Trib.). 6.4 When the documentary evidence containing contract notes of purchase, demat account, contract note of the sale and receipt of sale proceeds in bank account are seen vis-à-vis the observations of the AO on transactions, in our opinion, the documents are not sufficient to discharge the burden of proof that the purchase and sale transactions of the assessee were genuine. The onus was on the assessee to explain astronomical rise in prices of all the scrips purchased by him, that too without any financial rational. The assessee has failed to discharge his onus in this regard. ...The assessee has not ....
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.... the purpose of the making the addition or confirming the same. It is an admitted fact that the assessee is doing the business of purchase and sale of shares. As pointed out by the ld. Sr. DR the assessee is doing purchases in IPOs. Thus, there is no dispute that the assessee earns her income from transaction in shares. Just because the assessee has shifted from the IPOs and has made a purchase of the shares in M/s Panchshul Marketing Ltd., would not shift the head of income from "capital gains" to the "Adventure in the nature of trade", insofar as the assessee is an investor in the shares and is not in the business of dealing in shares. This being so, the decision relied on by the ld. Sr. DR would no more survive for consideration. 8. Now, I am faced with the decision of the coordinate bench of the Tribunal in the case of Deepansu Mohapatra, referred to supra, wherein the coordinate bench of the Tribunal in the case of that assessee has also dealt with the shares in the case of M/s Kailash Auto Finance Ltd. and has been held to be eligible for exemption u/s.10(38) of the Act. In the said decision, there was another issue also considered insofar as in the course of survey the as....