TaxTMI 
TaxTMI 
2023 (3) TMI 1431
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....T(A) in short) against the order of assessment passed u/s.143(3) & 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2017 & 23/03/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 5(4), Mumbai (hereinafter referred to as ld. AO). ITA No. 2533/Mum/2021(AY:2015-16),2532/Mum/2021 (AY:2014-15) & CO No.95/Mum/2022 (Arising out of ITA No.2532/Mum/2021 (AY: 2014-15) These appeals in ITA No. 2533/Mum/2021 & 2532/Mum/2021 & CO No.95/Mum/2022 for A.Yrs.2015-16 & 2014-15 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal Nos.CIT(A)-53, Mumbai/10003/2017-18 & CIT(A)-53, Mumbai/10001/2017-18 dated 07/09/2020 & 04/09/2020 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) & 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 5(4), Mumbai (hereinafter referred to as ld. AO). ITA No.2528/Mum/2021(Assessment Year :2015-16) This appeal in ITA No. 2528/Mum/2021 for A.Yr.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-53....
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....demat statements placed on record. The return of income was electronically filed for the A.Y. 2015-16 u/s.139(1) of the Act on 31/08/2015 showing total income of Rs 3,64,760/-. The ld. AO observed that during the A.Y. 2015-16, the assessee had sold the shares of Pine Animation Ltd (formerly known as Four K Animation Ltd) and claimed the long term capital gains thereon as exempt u/s 10(38) of the Act in the return of income. In the opinion of the ld. AO, the said scrip of Pine Animation Ltd is categorised as Penny Stock and hence the long term capital gains derived from sale of such scrip is to be treated as bogus. Accordingly, the ld. AO sought to examine the purchase and sale details of those shares from the assessee. The details of purchase and sale of shares together with the respective date, number of shares, mode of payment for purchase of shares, name and address of the broker through the shares were sold in recognised stock exchange and computation of long term capital gains were duly furnished by the assessee before the ld. AO. The entire details in this regard are captured in the following table hereinbelow:- PRIYANKAMIGLANI PAN No:ARIPS3477L Assessment Year: 2015....
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....d the shares were allotted and transferred in the name of the assessee. These shares were duly dematted by the assessee on 04.02.2013. Thereafter, on 20/05/2013, the face value of the shares were split from Rs 10 to Re 1 per share and thus the assessee holding of 425000 shares got increased to 4250000 shares. During the A.Y. 201415, the assessee sold 1200000 shares and in A.Y. 2015-16 , the assessee sold 961000 shares. The balance 2089000 shares are still lying with the assessee as is evident from the holding statement submitted by the ld. AR as on 27.02.2023. The assessee has sold 961000 shares between 10.04.2014 to 12.12.2014 on BSE through the broker namely Destimoney Securities Pvt Ltd for a consideration of Rs 7,86,28,300/-. During the year under consideration, the assessee earned Long Term Capital Gains (LTCG) of Rs 7,74,80,198/- on sale of shares of Pine Animation Ltd, which has been claimed as exempt u/s 10(38) of the Act. It is not in dispute that the shares of Pine Animation Ltd were purchased by the assessee as per the decision and guidance of Shri Rajinder Miglani, father in law of the assessee and he is the main person in the family who takes investment decisions on be....
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.... the bank statements evidencing the payments made for purchase of shares and sale proceeds credited in the bank account for sale of shares. c) Payments made by account payee cheques for purchase of shares and investment made in shares were duly reflected in the books of accounts of the assessee in the year of purchase. d) Copy of letter dated 04.02.2013 by Pine Animation Ltd intimating that the shares have been allotted to the assessee on 13.12.2012. e) Copy of Demat statement of the assessee of February 2013 showing inward entry of shares of Pine Animation Ltd. f) Copy of details of investments as on 31.03.2015 of the assessee showing investment in the shares of Pine Animation Ltd among others. g) Documentary evidences for Sale of shares of Pine Animation Ltd from 10.04.2014 onwards to Dec 2014 in the form of (a) Registered Share Broker's Contract Notes ; (b) Copy of Demat account evidencing debit (outward entries) of sold shares ; (c ) Copy of Bank statement showing amounts received from the share broker in respect of shares sold and (d) Details of Securities Transaction Tax (STT) paid on sale of shares through recognized stock exchang....
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.... u/s 69C of the Act towards unexplained commission expenditure was also deleted by the ld. CIT(A). 5. We find that the ld. AO had relied on the findings of the investigation wing of Kolkata and an interim order dated 08.05.2015 passed by SEBI wherein assessee and the company Pine Animation Ltd were prevented from accessing the securities market either directly or indirectly in any manner whatsoever, till the completion of final investigation by SEBI. The main grievance of the ld. AO is that rise in share price of Pine Animation Ltd is devoid of commercial principle or market factors ; that transactions are based on mutual connivance on part of assessee and operators ; that assessee resorted to preconceived scheme to procure bogus long term capital gains and hence the transactions are not bonafide ; that SEBI also passed an interim order in the case of Pine Animation Ltd holding that share prices were determined artificially by manipulations ; that these are close circuit transactions and are prestructured; that assessee had failed to discharge her onus cast on her ; that net worth of Pine Animation Ltd is negligible and that its share prices were artificially rigged ; that inves....
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....n is as to whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham. In our considered opinion, the transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so , when there is no dispute regarding the purchase price and sale price of shares. Our view is further fortified by the decision of Hon'ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom) wherein it was held that - "From the documents produced before the Court it was seen that the shares in question were, in fact, purchased by the assessees on the respective dates and the company had confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares of the respective buyer was also established by producing documentary evi....
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.... of India Act, 1992 read with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the Confirmatory Orders dated June 02,2016, July 05, 2016, August 22, 2016, and June 02,2017 qua aforesaid 114 entities (paragraph 9 above) with immediate effect. 12. The revocation of the directions issued vide the abovementioned orders (at paragraph 11) is only in respect of the entities mentioned at paragraph 9 of this order in the matter of Pine Animation Limited. As regards remaining entities in the scrip of PAL, violations under SEBI Act, SCRA, PFUTP Regulations, etc., were observed and SEBI shall continue its proceedings against them. Hence, the directions issued vide Orders dated July 05, 2016, August 22, 2016, and June 02,2017 against the remaining 62 entities shall continue. 5.5.1. We find that the name of the assessee is reflected in Serial Number 38 which is part of 114 entities acquitted by SEBI, on whom clean chit has been given. 5.6. We find that the assessee had held the shares in the instant case for 16 months in the case of Pine Animation Ltd and then sold the shares in the open market at prevailing market prices. From the above order of SEBI , it is very clear t....
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....n and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee has been finally discharged in the list of 114 entit....
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....ny stock transaction resulting in bogus long term capital gains. Accordingly, we direct the AO to delete the impugned addition of Rs 84,45,050. Further, since the other addition of Rs 22,712 by AO is also consequent to the aforesaid impugned addition, therefore, the said addition is also directed to be deleted. 5.9. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus. In our considered opinion, the ld. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of ours is further fortified by the decision of Hon'ble Delhi High Court in the case of PCIT vs Laxman Industrial Resources Ltd in ITA No. 169/2017 dated 14.03.2017. I....
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....e report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuinene....
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....er are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law. 5.12. We are conscious of the decision of Hon'ble Delhi High Court in the case of Suman ....
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....cerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration 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 retur....
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....e 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 case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (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 (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 fac....
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.... upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of „preponderance of probability‟ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors 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 go 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. 5.15. We find that the ld. CIT(A) had called for a remand report twice from the ld. AO before passing the appellate order. The remand re....
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....h Court decision in CIT vs Jamnadevi Agarwal reported in 328 ITR 656, whereas the facts of the assessee herein before us are similar to the one prevailing in the case of Jamnadevi Agarwal. 5.16.1. Hence we hold that the decision relied upon by the ld. DR vehemently before us on Sanjay Bimalchand Jain, is factually distinguishable and does not advance the case of the revenue. 17. We find that the Hon'ble Jurisdictional High Court in the recent case of PCIT vs Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04.03.2022 had held as under:- 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramakrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding t....
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....rder dated 08.05.2015 were finally revoked by SEBI in its final order dated 19.09.2017. 5.20. We find that the Hon'ble Calcutta High Court in the case of CIT vs Bhagwati Prasad Agarwal reported in 2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009, had observed that the Assessee claimed exemption of income from Long Term Capital Gains. However, the ld. AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded there. He therefore held that the transactions were bogus. The Hon'ble High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by Hon'ble High Court. In the instant case of the assessee before us, no such enquiries were even sought to be made by the ld. AO with the stock exchange to understand whether the transaction....
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.... case. 11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price has risen from Rs.5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share, then how it can be inferred that such person entered into sham transaction few years ago and prepared for getting the benefit after few years when the share will start rising steeply. In present case even there was no reason for such suspicion when the shares were purchased years before the unusual fluctuation in the share price. Here in this case, we have given example of one of the Tax Appeal wherein the shares were purchased in the year 2004 and were sold in the year 2006, which is said to be one of the case wherein the gap in the purchase and sale of the shares was narrowest. In other cases as we have noticed from the various orders of the C.I.T(Appeal....
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....d other decisions that are rendered against the assessee, need not be followed by this Court in the peculiar facts and circumstances of the instant case. 5.24. The ld. DR relied on the decision of this tribunal in the case of DCIT vs Leena Power Tech Engineers (P) Ltd reported in 130 taxmann.com 341 (Mumbai Trib) dated 21.09.2021 in support of his contentions. We have gone through the said decision and we find that the said decision was rendered in the context of receipt of share capital and share premium by that assessee wherein the genuineness of transactions and creditworthiness were not proved by that assessee. This is factually distinguishable with the facts of the assessee before us. Hence reliance placed on this decision by the ld. DR does not advance the case of the revenue. 5.25. The ld. DR relied on the decision of Hon'ble Delhi High Court in the case of CIT vs Jansampark Advertising & Marketing (P) Ltd reported in 375 ITR 373 (Del) in support of his contentions. On perusal of the said judgement, it only postulates that the appellate authority should conduct enquiry on its own or by calling a remand report from the ld. AO and cannot merely brush aside his co-terminu....
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....supra does not advance the case of the revenue. 5.26. In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of Pine Animation Ltd within the meaning of section 68 of the Act. The sale proceeds have been received by the assessee from the stock exchange through the SEBI registered share broker by account payee cheques through regular banking channels. We find that the three ingredients of section 68 of the Act are duly fulfilled by the assessee in the instant case. Hence there is no question of making any addition as unexplained cash credit u/s 68 of the Act in the instant case. 5.27. Considering the totality of the facts and circumstances of the instant case and respectfully following the judicial precedents relied upon hereinabove, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee by deleting the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 6% against the same. Accordingly, the grounds raised by the revenue are dismissed. 6. We find that the ld. AR before us, without preferring a....
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....d by the assessee for the A.Y. 2014-15 in CO No. 91/Mum/2022, we find that at the outset, there is a delay of 57 days in preferring cross objections by the assessee before us. The assessee had filed an affidavit explaining the reasons for the delay and the same is placed on record. On going through the same, we are inclined to condone the delay as the assessee was having sufficient cause in not preferring cross objections in time. 11. We find that the assessee has challenged the validity of reassessment u/s 147 of the Act in the cross objections for the A.Y. 2014-15. The grounds raised by the assessee in this regard are as under:- "1) In the facts and circumstances of the case and in law, the learned Assessing Officer erred in re-opening the assessment u's 147 of the Act by solely placing reliance on the information received from investigation wing and without conducting independent examination to form a belief that income has escaped assessment 2) In the facts and circumstances of the case and in law, the learned Assessing Officer erred in re-opening the assessment u/s 147 of the Act by relying on the statements of various unrelated parties recorded by Inv....
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....into at the time of recording the reasons for reopening. Hence the grounds raised by the assessee in her cross objections are hereby dismissed. 12. In the result, the appeal of the revenue in the case of Priyanka Ankit Miglani in ITA No. 2530/Mum/2021 for A.Y. 2014-15 is dismissed and cross objection of the assessee in CO No. 91/Mum/2022 is dismissed. Archana Anuj Miglani - ITA No. 2533/Mum/2021 - Asst Year 2015-16 - Revenue Appeal 13. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon'ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication. 14. The facts of this assessee and issues involved in the appeal of the revenue for A.Y. 2015-16 are identical with facts and issues prevailing in the case of Priyanka Ankit Miglani in A.Y. 2015-16. Hence the decision rendered by us in A.Y. 2....
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....ngly, the grounds raised by the assessee in Cross Objections are dismissed. 20. In the result, the appeal of the revenue in the case of Archana Anuj Miglani in ITA No. 2532/Mum/2021 for A.Y. 201415 is dismissed and cross objection of the assessee in CO No. 95/Mum/2022 is dismissed. Anuj Rajinder Miglani - ITA No. 2528/Mum/2021 - Asst Year 2015-16 - Revenue Appeal 21. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon'ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication. 22. The facts of this assessee and issues involved in the appeal of the revenue for A.Y. 2015-16 are identical with facts and issues prevailing in A.Y. 2015-16 in the case of Priyanka Ankit Miglani in ITA No. 2531/Mum/2021. Hence the decision rendered by us in A.Y. 2015-16 in ITA No. 2531/Mum/2021 shall apply m....