TaxTMI 
TaxTMI 
2024 (3) TMI 1155
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....selected for scrutiny. The AO noted that the assessee had claimed Long Term Capital Gain (LTCG) of Rs. 2,05,52,685/- on sale of shares M/s. Shaleen Textile Ltd (hereinafter "M/s. Shaleen Textile"). The AO noted that the Kolkata Investigation Wing had undertaken investigation into 84 penny stocks which identified shares of M/s. Shaleen Textile as a penny stock. The AO took note of the modus operandi of the entry operators involved in facilitating bogus LTCG to beneficiaries like assessee, which according to AO is nothing but converting the black money of the beneficiaries to white. The AO noted that the assessee has purchased in the month of Nov, 2011 shares of M/s. Shaleen Textile and sold in the month of April, 2013 to Sep, 2013 and claimed LTCG of more than of Rs. 2 cr which is unbelievable. According to the AO, the assessee on 8.11.2011 purchased 10,000 shares of M/s. Shaleen Textile at an average price of Rs. 48.78/-; and on 23.04.2012 number of shares i.e. 10,000 were split into 1:19 Thus, total number of shares was 200000. Further on 07-03-2013 sub division of the shares were made from Rs 10/- to Rs 2/-; thus total number of shares was 10,00,000 shares. Thereafter, 3,72,100 s....
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....he Ld AO, grounds of appeal, submissions of the appellant and perused the material on record and also the legal position on the issues at hand. 6.1 The appellant was allotted 10,000 shares of Shree Shaleen Textiles Ltd through preferential allotment on 11.01.2012. These shares were purchased at Rs. 205/- per share (Rs. 10/- face value and a premium of 195/-). Subsequently, bonus shares were issued in the ratio of 1:19 on 23.04.2012. After that the shares held by the appellant stood at 2,00,000 shares (10000 lock in balance + 190000 free balance). Thereafter Rs. 10 face value shares were sub-divided into Rs. 2 per share on 13.03.2013, therefore, the number of shares held by the appellant was 10,00,000 shares. 3,72,100 shares were sold by the assessee during the period 30.04.2013 and 30.09.2013 for a consideration of Rs. 2,30,79,975/-. 6.2 In the order passed u/s 143(3) of the Act, the Ld. AO has doubted the genuineness of the transactions made by the Appellant in the scrip of Shree Shaleen textiles Limited based on the following observations: * The financials of Shree Shaleen Textiles Limited were very poor during the period when the preferential shares we....
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....in Aggarwal (Director - Gateway Financial Services Ltd), Deepak Patwari (Controller of Destiny Securities Ltd) etc., they had never stated the name of the appellant in their statements. Further, it is stated that their statements have not been provided to the appellant. 6.6 It is also submitted that the learned Assessing Officer has merely acted upon presumption and has acted against the natural justice towards the appellant. 6.7 The AO has mentioned that funds received in the bank accounts of alleged operators have been transferred to the account of the share brokers which has been ultimately used to purchase shares. However, the AO has not been able to prove any cash trail in the case of the appellant. Merely because certain malicious transactions took place by some other persons in respect of shares held by the appellant does not lead to an automatic inference that the appellant has also sought benefit of such acts. 6.8 It is further submitted by the appellant that the price of scrips depends on many factors, Companies are operating in different segments and sectors which are not possible to be related and the price of the scrips cannot be correlated w....
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.... the nature and source thereof cannot be explained satisfactorily, it is open to the Assessing Officer to hold that it is the income of the appellant and no further burden is on the AO to show that the income is from any particular source. 7.1.............. 8.0 I also note that the appellant has relied upon the decisions of the jurisdictional ITAT, Mumbai in the cases of Dipesh Ramesh Vardhan vs. DCIT [I.T.A. No.7648/Mum/2019; Vijayrattan Balkrishan Mittal vs. DCIT [ITA No. 3429/Mum/2019; order dated 01.10.2019], CIT vs. Jamnadevi Agrawal Ors. [2010] 328 ITR 656 (Bom), Farrah Marker Vs. ITO (ITA No. 3801/Mum/2011 dated 27.4.2018), Gateway Leasing Pvt. Ltd vs. ACIT [WP No.: 2518 OF 2019; Smt. Kalpana Mukesh Ruia & Ors. vs. DCIT [I.T.A. No. 6519/Mum/2019, Narayan Ramchandra Rathi v. ITO (ITA No. 4811/MUM/2018), Arun S. Tripathi v. PCIT (ITA No. 2560/MUM/2018), and Anraj H. Shah (HUF) v. ITO (ITA No. 4514/MUM/2018), where the issues involved are identical and the hon'ble ITAT has held that the appellant has discharged the burden to prove genuineness of the LTCG earned during the year and accordingly capital gain on sale of shares cannot be doubted. 8.1 .........
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....(Rs. 10/- face value and a premium of 195/-). Subsequently, bonus shares were issued in the ratio of 1:19 on 23.04.2012. After that the shares held by the assessee stood at 2,00,000 shares (10000 lock in balance + 190000 free balance). Thereafter Rs. 10 face value shares were sub-divided into Rs. 2 per share on 13.03.2013, therefore, the number of shares held by the assessee was 10,00,000 shares. Out of which, assessee sold 3,72,100 shares through BSE during the period 30.04.2013 and 30.09.2013 for a consideration of Rs. 2,30,79,975/- and assessee claimed LTCG/exempt income u/s 10(38) of the Act to the tune of Rs. 2,05,52,685/-. The AO taking note of the claim of LTCG/exemption u/s 10(38) of the Act, called upon the assessee to prove the purchase/sale of the shares, and pursuant to it, the assessee filed the following documents: - a. Copy of share application form. b. Copy of allotment letter c. Copy of bank statement reflecting payment made for purchase of shares along with copy of account payee cheque drawn in favour of M/s Shree Shaleen Textile Limited d. Copy of Report of date-wise sale of Shares of M/s Shree Shaleen Textile Limited ....
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.... advisors in making the investment. Further, he has also stated that he was a regular investor in shares for last 5 years and the AO noted that assessee's son is a commerce graduate. Hence it cannot be said that the assessee was completely unaware of share market transactions. We find that the assessee has 1. purchased these shares by paying consideration of Rs 20,50,000/- through banking channels. 2. Ten Lakh shares of M/s. Shaleen Textile Ltd were allotted to the assessee by the said company as on 13.03.2013. 3. dematerialized the shares and kept the same in the Demat account. 4. sold the shares through stock exchange platform 5. received the sale consideration through banking channels. 7. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group/racket which were involved in the modus-operandi/manipulation of prices of shares. Since the allotment of shares, ....
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....(Ahmedabad Trib) (iii) Smt Rashmiben P. Kanuog Vs. ITO [ITA No. 2131/Ahd/2018; order dated 28.02.2022] and in the case of DCIT Vs. Shri Dilip B. Jiwrajka [ITA. No.2349/Mum/2021; order dated 29.11.2022] (Mum). 9. Coming to the judgements cited before us, it is clarified that we have carefully perused the cited judgements relied upon by both the parties and but only those judgements which are found to be relevant to the case in hand, have been discussed in the ensuing paragraphs. 10. The Ld. AR had rightly relied upon the judgment of the Hon'ble jurisdictional Bombay High Court in the case of Shyam R. Pawar (229 Taxman 256). In the decided case also, the assessee was purchasing and selling the shares through a broker in Mumbai, for purchase of shares of (i) M/s. Bolton Properties Ltd., (ii) M/s Prime Capital and (iii) M/s. Mantra; and he has transacted through the broker at Calcutta and two operators namely Mr. Sushil Purohit and Shri Jagdish Purohit, and one of them was the Director of M/s. Bolton Properties Ltd. who had purportedly admitted to have manipulated the share price of M/s. Bolton Properties Ltd. Mr. Jagdish also reportedly floated several investment companies which....
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....by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details receiv....
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.... been declaring agricultural income in his returns of income for the assessment years from 1990-91 to 2001-02. The total agricultural income returned by the assessee up to the assessment year 1999-2000 was at Rs. 7,57,883. The amount invested in the purchase of shares as on 31-3-1999 was Rs. 4,48,160. The cash available with the assessee by way of agricultural income was much higher than the investment made by the assessee in the purchase of shares as on 31-3-1999. After making the investments in the shares, the assessee had a surplus cash balance of Rs. 3,09,000 as on 1-4-1999. Thereafter, the assessee has further returned an agricultural income of Rs. 66,000 for the assessment year 2000-01. The amount invested in the purchase of shares in the year ending on 31-3-2000 was Rs. 2,57,020. Again the assessee had a cash balance thereof of Rs. 1,18,771. Therefore, it is, very clear that the investment made by the assessee in shares during the previous periods relevant to the assessment years 1999-2000 and 2000-01 was supported by cash generated out of agricultural income. The above agricultural income have been considered in the respective assessments. Therefore, the contention of the a....
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....the relevant period in which the assessee transacted in shares, persons like Radha Ashok and Sandeep D. Shah were not carrying on their business of brokers as in the manner they carried on the business in the past. Even their Stock Exchange Memberships were cancelled. It was Shri Satish Mandovara who was carrying on the business mainly for and on behalf of Shri Mangesh Chokshi, Director of M/s. Richmond Securities Pvt. Ltd. Those two persons have categorically admitted before the assessing authority that they had dealings with the assessee in respect of the share transactions. They have confirmed the transactions stated by the assessee that he had with them. These positive statements made before the assessing authority supported the case of the assessee. There is no force in the action of the assessing authority in relying on the negative statements of the other parties whose role during the relevant period was either irrelevant or insignificant. Therefore, in the facts and circumstances of the case, it is, our considered view that certain statements relied on by the assessing authority do not dilute the probative value of the statements given by other persons in favour of the asse....
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....of shares were also found recorded in the books of account. The department has no case that the survey was a staged enactment. A survey is always unexpected. So, it is not possible to presume that the assessee had collected certain fabricated documents and kept at his business premises so as to hoodwink the survey party to lead them to believe that the assessee had entered into share transactions. Atleast such an inference is not possible in law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee." 12. On further appeal, it is noted that the Hon'ble Bombay High Court in their order in ITA No. 456 of 2007 dated 07-09-2011 has affirmed the order of this Tribunal. 13. The Ld. AR of the appellant has rightly relied on another judgment of the Hon'ble Bombay High Court in the case of CIT Vs Jamna Devi Agarwal (328 ITR 656). In the decided case, also the....
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....rein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts. 16. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on findings of fact. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs." 14. The Ld. AR also brought to our notice the recent judgment rendered by the Hon'ble jurisdictional Bombay High Court in the case of PCIT v. Ziauddin A Siddique (ITA No. 2012 of 2017) dated 04.03.2022 which is found to be relevant in the facts involved in the present case. In the decided case, the issue before the Hon'ble High Court was whether this Tribunal was right in law in deleting the addition made u/s 68 of the AC....