TaxTMI 
TaxTMI 
2024 (6) TMI 536
X X X X Extracts X X X X
X X X X Extracts X X X X
....unting to Rs. 1,65,26,324/- for Assessment Year 2013-14 and Rs. 1,42,66,160 for Assessment Year 2014-15. Additions made in both the years are similar in nature relating to transaction of sale of shares, difference being in respect of scrips involved in each year and amount of sale consideration. 2.1. Assessee has also raised legal issue on re-assessment proceedings and assessment order passed thereafter u/s. 147 r.w.s. 143(3) for Assessment Year 2013-14 vide ground no.1 which has not been pressed in the course of hearing before us. Accordingly, ground no.1 for Assessment Year 2013-14 is dismissed as not pressed. 3. Brief facts of the case as culled out from records are that assessee is engaged in the business of buffing of SS utensils and labour job work. Return of income for Assessment Year 2013-14 was filed on 17.09.2013 reporting total income at Rs. 20,80,080/-. Case of the assessee was re-opened by issuing notice u/s. 148, dated 27.01.2017 based on information from the investigation wing of the Department that, the assessee had transacted in certain shares characterised by the Department as penny scrips. After necessary investigation and examination, this re-assessment pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roker, Bonanza Portfolio Ltd. & Ledger of Bonanza Portfolio Ltd. from the books of assessee of A.H. 2013-14 59 to 60 6. Ledger Account of assessee from the books of stock broker, Arihant Capital Markets Ltd. & Ledger of Arihant Capital Markets Ltd. from the books of assessee of A.Y.2013-14 61 to 69 7. Following relevant documents in support of shares of Essar India Ltd. purchased in preferential offer: i) Letter dated 17/03/2011 written by assessee to Board of Directors of Essar India Ltd. expressing his desire to purchase the 1,00,000 shares of Essar India Ltd. in preferential allotment 70 ii) Copy of share application letter dated 28/04/2011 given by assessee to Board of Directors of Essar India Ltd. along with copy of cheque of Rs. 15,00,000/- issued for purchase of 1,00,000 shares in preferential allotment 71 to 73 iii) Copy of allotment letter dated 26/05/2011 issued by Essar India Ltd. allotting 30,000 shares at the premium of Rs. 40 per share having face value of Rs. 10 each share on 25/05/2011 against the payments made by assessee at Rs. 15,00,000/- 74 iv) Copy of bank statement of asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale 46 to 48 4. Ledger Account of assessee from the books of stock broker, Arihant Capital Markets Ltd. of A.Y.2014-15 49 to 51 5. Following relevant documents in support of shares of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) purchased in preferential offer: i) Copy of share application letter dated 08/09/2012 given by assessee to Board of Directors of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) along with a cheque of Rs. 11,50,000/-issued for purchase of 50,000 shares in preferential allotment 52 to 53 ii) Copy of Information Memorandum dated 29/08/2012 of Out of City Travel Solutions Ltd. (Tilak Ventures Ltd.) issued for allotment of shares on preferential basis 54 to 75 iii) Copy of allotment letter dated 20/10/2012 issued by Essar India Ltd. allotting 50,000 shares at the premium of Rs. 22 per share having face value of Rs. 1/ each share on 18/10/2012 against the payments made by assessee at Rs. 11,50,000/- 76 to 77 iv) Copy of bank statement of assessee with Malad Sahakari Bank Ltd. evidencing the payment of Rs. 11,50,000/- made for purchase of above named scrip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....noted that assessee did not produce the purchasers of the shares sold by him. Ld. Assessing Officer, thus completed the assessment by making an addition u/s68 of the Act towards sale consideration received by the assessee on the transaction of sale of shares in the aforesaid scrips in the respective years. Aggrieved, assessee went in appeal before the CIT(A). 8. Ld. CIT(A) has reproduced extensive literature on the concept of preponderance of probability in various countries and India, on the plugging of loopholes in the system for black money, various other doctrines and plethora of judicial precedents which is appreciated. However, we note that the same has not been related and their relevance mapped to the facts of the case and corroborative documentary evidences placed on record by the assessee at the assessment stage. 8.1. Ld. CIT(A) while giving his decision in para 7 for Assessment Year 2013-14, observes that payment through cheque and the receipt of the sale proceeds through bank cannot prove the genuineness of the transaction. According to him, even the transaction through stock exchange cannot give strength to the fabricated devises. He further observes that there m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. Topwell Properties Pvt. Ltd. 4. Shallot DealtradePvt. Ltd. 4 25th August, 2022 Section 15-1 read Rule 5 Essaar India Ltd. 5 26th April, 2023 Settlement Order Arihant Capital Markets Ltd. 9.2. On each of the above orders, assessee has made his submission which is discussed as under: a) For order at Sr. No.1, it is submitted that this relates to period between 01.04.2014 to 11.03.2016, whereas assessee had sold the shares of Essar India Ltd. between 08.10.2012 and 27.02.2013. Shares of Out of City Travel Solutions were sold between 09.01.2014 and 04.03.2014 by following the prescribed procedures and applicable rules. Thus, this order has no relevance to the facts of the present case. b) For the order at Sr. No.2, proceedings initiated were dropped and no penalty was imposed. c) In respect of order at Sr. No.3, no investigation or enquiry of any kind was carried out against the assessee either by SEBI or by concerned stock exchange. Hence, this has no relevance or application to the case of the assessee. d) The order at Sr. No.4 is adjudicated in case of third parties which has no relevance or application to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already extracted above by way of index of the two paper books. 10.2. For the above observations and findings, we place our reliance on the decision in the case of CIT vs. Jamnadevi Agrawal[2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon'ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 10.3. Also, reliance placed by the ld. Assessing Officer on the report of investigation wing witho....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... From all of this, we notice that assessee has - a. purchased the shares under preferential allotment by making payment through banking channel. b. dematerialized the shares purchased by credit to the DMAT account and were later sold out of the same holding. c. sold the shares on the platform of recognised stock exchange on the then prevailing prices. d. received the sale proceeds through stock market process in his bank account. 11.2. From the above, we note that ld. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless. 12. Ld. Assessing Officer, while drawing the adverse conclusion noted about the cash trail in the accounts of entry providers. He based his conclusion on the finding of investigations done by the Investigation Wing rather than bringing on record any direct and cogent material to establish existence of such a cash trail where the assessee has transacted in cash. In this respect, ld. CIT(A) has supported the ld. Assessing Officer by stati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry as provided in Sec. 142(2), it is incumbent upon the AO u/s. 142(3) to give an opportunity of being heard in respect of any material gathered on the basis of any enquiry done u/s. 142(2) and proposed to be utilised for the purpose of the assessment. It is important to note that Sec. 142(3) uses the word "shall" which makes it mandatory requirement on the part of the AO to comply with it. 13.3. We also take note of the provisions of Sec. 143(3) wherein the assessment is to be completed by the AO which also provides in subsection (3) that AO shall make an assessment by an order in writing, inter alia, "after taking into account all relevant material which he has gathered." Thus, by keeping the provisions of Sec. 142(3) read with section 142(2) and Sec. 143(3) in juxtaposition, we understand that it is a mandatory statutory requirement on the part of the AO to comply with the provisions of Sec. 142(3) in completing the assessment proceeding, failure of which may vitiate the entire assessment itself since this sub-section uses the word "shall". The only exception to this requirement is where an assessment is made u/s 144 which is not so in the present appeals before us. 14. As....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ares of the alleged penny stock of shares of Ramkrishna 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 that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal." 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. but 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....