TaxTMI 
TaxTMI 
2024 (5) TMI 692
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....s and in law, the Ld. Commissioner of Income-tax(Appeals) was justified in deleting the addition made u/s 68 of the Act, without appreciating the findings of the AO and also ignoring the larger scam of organized tax evasion by way of bogus capital gain generated in penny stock? 3. Whether on the facts and circumstances and in law, the Ld. Commissioner of Income-tax(Appeals) was justified in deleting the addition made u/s 68 of the Act, without appreciating the findings of the AO and overlooking the fact that entire transactions were managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious LTCG and claim bogus exemption? 4. The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal." 3. The grounds taken by the Revenue pertain to disallowance of Long Term Capital Gain (LTCG) claimed exempt u/s. 10(38) of the Act and addition of Rs. 33,30,995/- made u/s. 68 of the Act. Before we discuss the arguments taken in this appeal by the two sides, it will be relevant to recapitulate the facts of the case. Brief facts of the case: 4. The return of income was f....
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....M/s. Unno Industries Ltd. in tranches between 08.07.2013 and 06.09.2013, for a total sale consideration of Rs. 33,15,085/-. Thus, the assessee had derived LTCG of Rs. 31,90,085/- on sale of shares of M/s. Unno Industries Ltd. (vi) The AO found that no LTCG was disclosed in the return of income for A.Y. 2014-15 neither any exempt income u/s. 10(38) of the Act was shown in the return. When this fact was brought to the notice of the assessee, it was explained that LTCG of Rs. 31,90,085/- was exempt income u/s. 10(38) of the Act, which was reflected as capital addition of equivalent amount by the Accountant. It was further explained that the Tax Consultant forgot to mention the exempt income under the relevant schedule of return of income by mistake and that mis-reporting of the information was an inadvertent error. (vii) The AO found that the shares of M/s. Unno Industries Ltd. was one of the BSE listed penny stock company which was used for generating bogus LTCG. The price of shares of such stock company were rigged and raised through circular trading. SEBI had placed the company M/s. Unno Industries Ltd. under surveillance and trading in the company was under suspension. (viii....
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....the amount of Rs. 33,03,995/- under Section 68 of the Act. 6. In first appeal, the CIT(A) allowed the appeal of the assessee by following the decision of CIT(A)-12, Ahmedabad on the identical issue in the case of Late Shri Mihir P. Panchal for A.Y. 2014-15. The CIT(A) also relied upon the decision of Ld. ITAT, Delhi in the case of Mohit Hora (HUF) vs. ITO in ITA No. 410/Del/2018. In both these cases LTCG on sale of shares of M/s. Unno Industries Ltd. was involved. Aggrieved with the order of the CIT(A), the Revenue is in appeal before us. Submission of the Revenue: 7. Shri C S Sharma, Sr. DR appearing for the Revenue submitted that the CIT(A) has allowed relief to the assessee by merely relying on the decision of CIT(A)-12, Ahmedabad and the decision of the ITAT, Delhi and without appreciating the facts of the present case. He further submitted that the CIT(A) has not appreciated and discussed the facts brought on record by the AO and has not taken a decision after considering the merits of the case. The Ld. Sr. DR has painstakingly taken us through all the facts as mentioned in the assessment order as already enumerated earlier and strongly supported the order of the AO. Submi....
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....t involved and the monetary limit prescribed. It is found that the issue involved in this case is bogus capital gain through penny stock and, therefore, this case is found to be covered under the exception of the said circular. Therefore, the objection of the Ld. AR for dismissing the appeal due to low tax effect is rejected. 10. We have carefully gone through the decision of the ld. CIT(A). As rightly pointed out by the Ld. Sr. DR, the CIT(A) has allowed the appeal of the assessee by merely relying on the decision of CIT(A)-12, Ahmedabad in the case of Late Shri Mihir P. Panchal for A.Y. 2014-15. The finding of the ld. CIT(A) is reproduced below: "5.4 I have gone through the assessment order, submissions of the appellant judicial pronouncements and facts of the case. The appellant has filed copy of CIT(A)-12, Ahmedabad on the identical issue in the case of Late Mihir P Panchal (ABJPP7642M) for A.Y. 2014-15. The CIT(A)-12, Ahmedabad has concluded in his order the relevant extract is reproduced as under: "....13.9 the AO in assessment order has also doubted financial statements or Unno Industries from March 2011 but in present case, the appellant has purchased shares of Basukin....
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....quently a request was made for withdrawal of appeal. The other case of Mohit Hora (HUF) relied upon by the Ld. CIT(A) was the decision of Delhi Tribunal in ITA No. 410/Del/2018. The only similarity was that in that case also the sale of shares of Unno Industries Ltd. was involved. The addition made in this case under Section 68 of the Act was deleted by the Ld. CIT(A) merely for the reason that the sale of shares of Unno Industries Ltd. was also involved in both the cases as relied upon in his order. The Ld. CIT(A) was not correct in blindly following the decision of the CIT(A) and the ITAT in those two cases without examining the facts of the present case. 12. Where the issue of LTCG is involved, not only the sale of shares but the genuineness of the purchases also has to be examined. In the mechanism of capital gains computation what is relevant is not only the sale of shares but also the purchase of shares. Therefore, the genuineness of the entire transaction of acquisition as well as sale of shares has to be looked into as a whole. The CIT(A) was not correct in adopting a dissecting approach by accepting the sale of shares of Unno Industries Ltd. as genuine without examining t....
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....othing wrong in the Revenue's doubt about the genuineness of the transaction, considering the volatile fluctuation in share price of M/s. Unno Industries Ltd. The AO had issued a detailed show cause notice to the assessee to establish the genuineness of the LTCG as claimed. It is apparent from the assessment order that the AO had doubted the genuineness of the transactions and this aspect was not at all considered and commented upon by the CIT(A) in his order. 15. The genuineness of transactions can be tested on the principle of preponderance of human probability as settled by the Hon'ble Apex Court in the case of Smt. Sumati Dayal vs. CIT, (1995) 214 ITR 801 (SC). The documentary evidences in themselves, cannot be held as conclusive evidence of the transaction. When someone is deliberately entering into a transaction in shares of penny stock company, it is obvious that all the documentary evidences will be in order. After all, he or she has to establish the transactions with reference to the documentary evidences so as to claim the benefit of exemption of LTCG available under the Act. Therefore, while examining such evidences, surrounding circumstances also has to be taken into a....
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....e. The distinctive number of shares appearing on contract note/bill cannot be read and the certificate number is missing. The assessee has failed to bring on record any evidence as to on what date the shares of M/s. Basukinath Real Estate Pvt. Ltd. were actually transferred in the name of the assessee. The question as to why a broker based in Kolkata will sale the shares to a client resident in Vadodara on credit, with whom there was no previous transaction, and why the ownership of such shares sold on credit will be transferred without receipt of payment, has not been answered or explained. It is further found from the contract memo that no brokerage was charged by M/s. Jwalaji Suppliers Pvt. Ltd., Kolkata for sale of the shares to the assessee. The broker in Calcutta was after all doing a business and not running a charity. 17. It is further found that payment for the shares purchased from Kolkata broker was made on 23.03.2012 whereas the bonus shares were allotted to the assessee prior to that date on 16.03.2012 itself. It is difficult to digest that a broker will transfer shares to an unknown first-time buyer without receiving the payment. It is equally difficult to believe th....
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....eal Estate Pvt. Ltd., the shares of which was initially acquired by the assessee, had admitted that he was providing accommodation entries through multilayered transactions and the involvement of shares of M/s. Basukinath Real Estate Pvt. Ltd. and that of M/s. Unno Industries Ltd. in providing such accommodation entries cannot be ruled out. 20. The discrepancies and adverse evidence collected by the AO in the course of assessment were not explained by the assessee and the thrust was always on the documentary evidence of the transactions. As already discussed earlier, the documentary evidences cannot be relied upon and treated as conclusive in view of various unanswered questions as already discussed earlier and the dubious nature of transactions. The surrounding circumstances of the transactions establish that the transactions entered into by the assessee was not genuine. The assessee had not discharged her onus against the overwhelming adverse evidences that has been brought on record by the Revenue authorities. 21. The thrust of the assessee's argument is that the sale consideration was received by cheque on which STT was paid and, therefore, the LTCG earned was genuine. This c....