2023 (8) TMI 335

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....e appeals are such that while filing returns of income of AY 2011-12 and 2012-13 as involved in these appeals, the assessee declared exempted long-term capital gain u/s 10(38) from sale of shares of M/s KCL Infra Projects Ltd. (KCLIPL) formerly known as M/s Kadam Construction Ltd. The cases of assessee were re-opened by revenue through notices u/s 148 and the assessment were ultimately made u/s 147 read with section 143(3) wherein the AO treated the shares of KCLIPL as what is called "penny stock" and capital gain declared by assessee therefrom as managed or non-genuine. Accordingly, the AO made addition u/s 68 amounting to Rs. 9,21,930/- and Rs. 19,42,723/- (equivalent to the full value of sale consideration received by assessee) in AY 2011-12 and AY 2012- 13 respectively. Aggrieved by action of AO, the assessee carried matter in first-appeal but could not succeed. Now, the assessee has come in next appeal before us. 4. Presently, the controversy to be adjudicated by us is whether or not the revenue is justified in treating the capital gain declared by assessee as nongenuine and thereby make addition u/s 68? 5. At the outset, we may briefly take note of the data of transactions ....

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....,47,642 Total 35000 17,57,769 (iii) It is submitted that the assessee made payments of purchase consideration to M/s Arihant Capital Markets Ltd. on different dates through banking channel through cheques drawn on assessee's A/c with Union Bank of India, copy of bank Pass-Book is placed at Page No. 25 to 27 of Paper-Book. The payment is neither made on one single day nor in cash. The details of payments are as under: Date Cheque No. Amount 20.12.2007 141636 6,87,176 26.12.2007 141638 1,91,081 26.12.2007 141637 5,08,600 10.01.2008 141641 1,23,270 23.01.2008 141644 2,47,642 Total   17,57,769 (iv) It is submitted that after purchase the shares were immediately credited in De-mat A/c on 31.12.2008. It is pointed out that there is a slight time-gap of about 11 months in-between last purchase on 07.01.2008 and credit in De-mat on 31.12.2008 but that was for the reason that in those days, the dematerialization system was not popular and the persons used to maintain physical shares. (v) It is submitted that the even after credit of shares in De-mat A/c on 31.12.2008, the assessee did not sell shares in one lot or even in one year. The sales was made in tr....

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....rted and there was exponential rise in the price of share and in volume but there was no financial backing to support the abnormal rise (Para No. 4.1 of assessment-order). (vi) That based on above observations, the AO has found that in totality and on preponderance of probabilities, it emerged that the purchase and sale of shares was executed for the purpose of lending legitimacy to assessee's unaccounted income. (vii) Lastly, Ld. DR relied upon following decisions to strengthen the revenue's stand: (a) Sumar Poddar Vs. ITO (2019) 112 taxmann.com 330 (SC) (b) PCIT Vs. Swati Bajaj (2022) 139 taxmann.com 352 (Calcutta HC) (c) Shyam Sunder Bajaj (2022) 145 taxmann.com 315 (Kolkata ITAT) (d) Pooja Ajmani (2019) 106 taxmann.com 65 (Delhi ITAT) (e) Sanjay Kaul (2020) 114 taxmann.com 186 (Delhi ITAT) (f) Sandeep Bhargava (2019) 109 taxmann.com 174 (Delhi ITAT) 8. In Rejoinder, Ld. AR made following submissions/contentions: (i) That the assessee has filed all documents and not a single document is disputed by AO. In fact, Ld. CIT(A) has himself mentioned in Para No. 5.6 of appeal-order that the AO has not disputed documents of assessee. (ii) That the shares were purcha....

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....odge any allegation of revenue on assessee's transactions. Then, we also find that the assessee is having investment in other securities as well and it is not the case that the assessee has made a stray transaction of shares of KCLIPL only. Thus, there is a complete series of factors and evidences demonstrating the genuineness of assessee's transactions and not a single of them has been disputed by revenue. 10. Now, we would like to deal with some more contentions put forward on behalf of revenue. In so far as the buyers of shares sold by assessee are concerned, we find merit in the submission of Ld. AR that the entire sale was made through platform of stock-exchange where nobody knows who is buyer. Further, the AO has not provided any details of enquiries directly undertaken by him from buyers through the process of section 133(6) and the AO's noting in assessment-order came to the knowledge of assessee only after seeing the assessment-order. Same is the case of statement of Shri Mohan Jhawar, director of KCLIPL, which were not provided or confronted to assessee. Since the enquiries from buyers u/s 133(6) and statement of Shri Mohan Jhawar are assessee-specific and heavily relied....