TaxTMI 
TaxTMI 
2024 (6) TMI 152
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....the order of the Ld. AO deserves to be quashed for being passed in gross violation of principles of natural justice. 2. ON VALIDITY OF THE PROCEEDINGS: 2.1. In the facts and circumstances of the case and in law, the Assessment order passed by the Ld. AO and affirmed by the Ld. CIT(A) is bad in law, void and deserves to be quashed since the same is passed in violation of the extant law and judicial precedents in this regard. 2.2. In the facts and circumstances of the case and in law, the order passed by the Ld. CIT(A) affirming the assessment order is bad in law since the same is sans any independent reasoning and is a non-speaking order by merely relying on certain judgements, the applicability of which to the Appellant's case is under serious doubt. 3. ON MERITS: 3.1. In the facts and circumstances of the case, and in law the Ld. CIT(A) erred in confirming the action of the Ld. AO in making an addition of Rs, 75,39,089/- under section 68 of the Act thereby denying the claim for exemption under section 10(38) as made by the Appellant in its return of Income. 3.2. While doing so the Ld. CIT(A) failed to appreciate that: ....
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....of the Act calling for various details and information in support of return of income filed. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and furnished the details and the case was discussed. The AO found that the assessee has disclosed income from business, income from capital gains and income from other sources. Further the assessee has claimed exemption U/sec10(38) of the Act being long term capital gains on sale of shares of Rs, 74,20,500/- and the A.O. has called for the details and information. The AO found that the assessee has earned long term capital gains on sale of shares of M/s SRK Industries Ltd and the assessee was asked to produce the details of purchase of shares, mode of payment and relevant supporting documents/evidences in support of purchase and sale of shares. Whereas the assessee has purchased 10,000 shares of M/s Transcend commerce Ltd Ltd at Rs, 10/- per share in off market transaction from M/s Maxigain Advisory Pvt Ltd for Rs, 1 lakh through cheque on 07.06.2012 and the shares were credit to Demat account on 16.06.2012. Subsequently the company M/s Transcend commerce Ltd was amalgamated with M/s SRK Industries Ltd as pe....
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....t of the claim. The Ld. AR has put forth the various propositions and explained the basis and reasons for purchase of shares on 07.06.2012 and the shares were credited to the demat account on 06.06.2012 as per the demat statement placed at page No. 71 of the paper book. Further the assessee was holding the shares for more than 12 months and the fact remains that subsequent to the credit of shares in demat account, due to scheme of amalgamation 10,000 shares held by the assessee in demat account of M/s Transcend Industries Ltd on mereger with M/s SRK Industries Ltd. The assessee was allotted 22,200 shares in lieu of 10,0000 shares of M/s. Transcend Industries Ltd. The Ld. AR mentioned that no independent enquiry was conducted by the revenue. The Ld.AR substantiated the submissions with the fact sheet, paper book and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld.DR submitted that the share transactions are not genuine and are doubted and the Ld.DR supported the order of the CIT(A) and relied on the submissions. 5. We heard the rival submissions and perused the material on record. The Ld,AR envisaged that the CIT(A) has erred in sustaining the addition u....
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....curities in the statement recorded u/sec 131 of the Act and the genuineness of the transaction. The Ld.AR emphasized that the assessee is only an investor and was not involved in the price rigging of shares and no enquiry was conducted by the SEBI and BSE against the assessee and relied on the submissions made before the lower authorities and judicial decisions. 7. The Hon'ble High Court of Bombay in the case of Pr. CIT Vs. Indravadan Jain HUF. ITA No.454 of 2018 dated 12.07.2023 [2023] 156 taxman.com 605 (Bom) has considered the facts of sale of shares and dismissed the revenue appeal as under: 3. Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act Respondent had claimed to have purchased this scrip at Rs, 3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs, 155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was ev....
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....e floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal 5. We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arised. 8. Similarly the Jurisdictional High Court of Bombay in the case of CIT Vs. Shyam R. Pawar, 54 taxmann.com 108 has observed as under: Section 68 of the Income-tax Act, 1961 Cash credit (Share dealings) - Assessment years 2003-04 to 2006-07 Assessee declared capital gain on sale of shares of two companies. Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices. held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus Whether on facts, transactions in shares were r....
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.... a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. [Para 6] 9. Hon'ble Supreme Court in the case of Pr. CIT Vs. Parasben Kasturchand Kochar, 130 taxmann.com 177 (SC) has observed as under: Section 10(38) of the Income-tax Act, 1961 Capital gains Income arising from transfer of long-term securities (Shares) Assessment year 2014-15 Assessee-individual engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under section 10(38) - Assessing officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under....
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.... to be deleted. (Para 4) Assessee had sold shares through MTL shaes and Stock Brokers Limited as is noted by Assessing Officer in reply to question No.24 which is a SEBI registered Stock Broker. Furthermore the payment for sale of shares was received through Banking channels. All these documentary evidences in favour of the assessee were rejected by Assessing Officer merely on the basis of some casual replies given by assessee to the Assessing Officer. However, the fact remains that all the documentary evidences are in favour of assessee and learned CIT(A) has passed a very reasoned and speaking order and we do not find any infirmity in the same." 11. The Hon'ble High Court of Bombay in the case of CIT Vs. Smt. Jamnadevi Agrawal, 328 ITR 656 (Bom) has observed as under: Income-Cash credit-Genuineness of share transactions Assessees offered long- term capital gains arising from sale of shares-On the basis of material seized during the search in the case of various assessees who belong to H group, AO did not accept the capital gains and treated the entire sale proceeds of the shares as income from undisclosed sources under s. 68-Not justified-Fact that the assess....
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.... evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TT) (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995)....
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....ut that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs. 13. The Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax Vs. Smt. Renu Aggarwal (2023) 456 ITR 249 (SC) dated 3-07- 2023 has observed as under "CASH CREDITS-TRANSACTIONS IN PENNY STOCKS-FINDING THAT THERE WAS NO ADVERSE COMMENT FROM STOCK EXCHANGE OR COMPANY WHOSE SHARES INVOLVED ASSESSING OFFICER QUOTING FACTS PERTAIN- ING TO COMPLETELY UNRELATED PERSONS NAME OF ASSESSEE NEITHER QUOTED BY ANY SUCH PERSONS NOR MATERIAL RELATING TO ASSESSEE FOUND IN INVESTIGATION-TRIBUNAL AFFIRMING AND HIGH COURT DIS- MISSING DEPARTMENT'S APPEAL-SUPREME COURT-SPECIAL LEAVE PETITION DISMISSED-INCOME-TAX ACT, 1961, ss. 68, 260A. Where the High Court d....
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....ssing Officer had made the additions While allowing relief to the assessee, the learned Commissioner (Appeals) has specifically held that there is no adverse comment in the form of general and specific statement by the principal officer of the stock exchange or by the company whose shares were involved in these transactions and he held that the Assessing Officer only quoted the facts pertaining to various completely unrelated persons whose statements were recorded and on the basis of unfounded presumptions He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the Investigation Wing. The learned Commissioner (Appeals) relying on various orders of the Lucknow Benches and other Benches has allowed relief to the asses- see by placing reliance on the evidence filed by the assessee before the Assessing Officer. I do not find any adversity in the order of the learned Commissioner (Appeals) specifically keeping in view the fact that the Lucknow Benches in a number of cases after relying on the judgment of the hon'ble Delhi High Court in the case of Krish....
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.... listed in the stock exchange and shares of this company are being traded and SEBI had not passed any adverse order against the said company either suspending the trading of the scrip or banning the scrip. Moreover, the ld AR also placed on record the letter dated 14.2.2019 addressed by SRK Industries Ltd to Bombay Stock Exchange informing the outcome of the Board Meeting held on 14.2.2019 approving the unaudited standalone financial results of SRK Industries Ltd for the quarter ended 31st December 2018 in the format prescribed by SEBI listing norms and the stock exchange. From the said quarterly financials, we find that SRK Industries Ltd revenue from operations for the quarter ended Dec 2018 was Rs 30.61 crores which clearly shows that it is an operational company and not merely a company having no value as alleged by the revenue before us to make it fall under the category of 'penny stock'. Moreover, the status of this company M/s SRK Industries Ltd in the website of Ministry of Corporate Affairs as on 26.2.2019 is still shown under the category of 'Active'. In the said status report of website of ministry of corporate affairs, we find that the fixed assets and current assets of....
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....nt in any manner whatsoever either by the ld AO or by the ld CITA. 7.4. We find that the assessee was duly examined on oath u/s 131 of the Act during the course of assessment proceedings on 29.11.2016 which fact is also mentioned in Page 26 of the Assessment Order. In the said statement, the assessee in reply to Question No. 9 had categorically stated that she had been making investments in capital market and equity shares through broker M/s Sharekhan Limited and through relatives and friends. The assessee had also categorically replied in response to Question No. 13 that the investment in shares of SRK Industries Ltd (Transcend Commerce Ltd prior to merger) was made based on the advice of her friend Shri Shivajirao Jondhale. The assessee in reply to Question No. 17 had also stated that she did not make any enquiry about the financial condition of the shares of SRK Industries Ltd but she was told by Shri Shivajirao Jondhale that the value of the shares would get appreciated. This was the sole basis of the assessee making the investment in shares of Transcend Commerce Ltd (Later merged with SRK Industries Ltd) which cannot be doubted at all. In our considered opinion, it ca....
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....aper Book. The ld DR also filed written submissions wherein he had reiterated the findings of the ld AO 7.7. We find that the co-ordinate bench of Kolkata Tribunal in ITA No.661/Kol/ 2018 in Shreyans Chopra vs ACIT dated 25.7.2018 on similar set of facts and circumstances had held as ------------------------------- ----20. Applying the proposition of law laid down in the above judgments to the facts of this case we are bound to consider and rely on the evidence produced by the assessee in support of its claim and base our decision on such evidence and not on suspicion or preponderance of probabilities. No material was brought on record by the AO to controvert the evidence furnished by the assessee. Under these circumstances, we accept the evidence filed by the assessee and allow the claim that the income in question is Long Term Capital Gain from sale of shares and hence exempt from income tax." The scrips in question were the subject matter of adjudication before this Tribunal. The Kolkata Bench of the ITAT in a number of decisions have, on similar facts and circumstances of the case, decided the issue in favour of the assessee. We list some of these dec....
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....luded that the decision of Hon'ble Bombay High Court supra is factually distinguishable. 7.9. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs Mukesh Ratilal Marolia in ITA No. 456 of 2007 dated 7.9.2011 had held as under:- "5. On further appeal, the ITAT by the impugned order allowed the claim of the assessee by recording that the purchase of shares during the year 1999-2000 and 20002001 were duly recorded in the books maintained by the Assessee. The ITAT has recorded a finding that the source of funds for acquisition of the shares was the agricultural income which was duly offered and assessed to tax in those Assessment Years. The Assessee has produced certificates from the aforesaid four companies to the effect that the shares were in-fact transferred to the name of the Assessee. In these circumstances, the decision of the ITAT in holding that the Assessee had purchased shares out of the funds duly disclosed by the Assessee cannot be faulted. 6. Similarly, the sale of the said shaers for Rs 1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt Ltd and M/s Scorpio Management Consultants Pvt Ltd cannot be disputed,....
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....al Commissioner of Income Tax Vs. Kuntala Mohapatra, [2024] 160 taxmann.com 608 (SC), dated 04.03.2024 has observed as under: "SLP dismissed against order of High Court that where shares were purchased via account payee cheques, held in a Demat account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax assessee was eligible to claim exemption u/s 10(38) for long term capital gains." "Section 10(38), read with sections 68 and 69, of the Income-tax Act, 1961 Capital gains Income arising from transfer of long long term securities (Illustrations) - Assessment year 2014-15 Assessee filed its return for relevant year - Subsequently, pursuant to a survey assessee filed revised return and claimed exemption in respect of long-term capital gains on shares under section 10(38) - Assessing Officer rejected assessee's plea and made additions under sections 68 and 69 by relying on statements from 'entry operators' On appeal, Commissioner (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized ....