TaxTMI 
TaxTMI 
2024 (4) TMI 1027
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly as the decision of Hon'ble ITAT has not been accepted by the department and an appeal is being filed before Hon'ble Gujarat High Court." 3. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that the assessee in the return of income has claimed exemption of capital gains of Rs. 5,51,09,170/- under Section 10(38) of the Act on account of sale of shares of M/s. Comfort Fincap Ltd. During the source of assessment the Assessing Officer was of the view that the company was not doing substantial business and not declaring dividend and accordingly disallowed the claim of exemption of Long Term Capital Gain on sale of impugned script for Rs. 5,51,09,170/- and added the same to the total income of the assessee. 4. In appeal, the Ld. CIT(A) sustained the quantum additions made by the Assessing Officer. However, in further appeal before ITAT the Tribunal deleted the additions (in the case of Sanjay Prataplal Mehta in ITA No. 509/Ahd/2018), and allowed the appeal of the assessee, with the following observations:- "12.9 In our view, the income generated by the assessee cannot be held bogus only based on the modus op....
X X X X Extracts X X X X
X X X X Extracts X X X X
....exemption provided under section 10(38) of the Act in a situation where it is established that the share price of the company was rigged up to extend the benefit to certain parties. Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometimes we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished, and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s Comfort Fincap Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good faith. Furthermore, the shares were held by the assessee for almost 3 years. As such the assessee purchased the impugned shares on 15th March 2011 and sold the same during the period 27^th January to 6th February 2014. Thus, it was not possible for the assessee to foresee the price of the script in future. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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 and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rough bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Ld. A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, ld. A.R. also cited an order of Co-ordinate Benchin ITANo. 62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. vs. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the ld. A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee. 12.14 At this juncture, we also feel pertinent to refer the order of coordinate bench of Indore Tribunal in case of Shivnarayan Sharma & Ors bearing ITA Nos. 889/Ind/2018, 474,206,60,987/Ind/2019, where in identical fact and circumstances hel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ogus LTCG, to the assessee. 18. We observe that all the above stated facts and the issue of genuineness of LTCG and failure of the Ld. A.O to provide opportunity to cross examination by the assessee with regard to the addition made u/s 68 of the Act for the sale consideration received from sale of equity shares of M/s SAL and addition for estimated brokerage expenses has been dealt by the Co-ordinate Bench of Mumbai Tribunal in the case of Dipesh Ramesh Vardhan V/s DCIT (supra) and the same is squarely applicable on the instant appeals. ******************* 23. We therefore in the light of above judgments which are squarely applicable in the issues raised in the instant appeals are of the considered view that the claim of Long Term Capital Gain made by the respective assessee(s) deserves to be allowed as they have entered into the transactions of purchase and sales duly supported by the documents which have not found to be incorrect. The conditions provided u/s 10(38) of the Act have been fulfilled by the assessee(s) namely Shivnarayan Sharma, Sapan Shaw, Prayank Jain, Govind Harinarayan Agrawal (HUF) and Manish Govind Agrawal (HUF) as they have sold the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 held that the income tax authorities before relying upon any material are required to provide such material to the assessee for rebuttable. The relevant observation of the Hon'ble Apex Court is extracted as under: It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. 12.16 In the case on hand, the revenue authorities to hold the transaction carried out by the assessee as sham transaction referred and relied on material and statements of various broker or entry operator recorded or collected by the DDIT Kolkata and Mumbai. However, any material/ statement was neither provided to the assessee for his rebuttable nor any independent cogent material brought on record sug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eport/ finding unearthed in case of third party/parties in the given facts and circumstances unless cogent material is brought against particular assessee on record. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of assessee's appeal are allowed. 13. In the result, the appeal of the assessee is hereby allowed." 5. Meanwhile, the Ld. Assessing Officer levied penalty under section 271(1)(c) of the Act on the assessee, which later came to be deleted by Ld. CIT(A) on the ground that since the issue in quantum proceedings has been decided in favour of the assessee by Hon'ble ITAT in the above referred decision, consequential penalty under Section 271(1)(c) of the Act does not survive. Accordingly, the Ld. CIT(A) directed the deletion of penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act. 6. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(A) directing the deletion of penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act. The Ld. D.R. submitted before us that the decision of Hon'ble ITAT in ITA No. 509/A....