2022 (6) TMI 1484

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....s that the issue is squarely covered in favour of the assessee by and under the judgment dated 29.10.2021 passed by the Coordinate Bench in ITA No. 280/Ahd/2019 for A.Y. 2015-16. 5. On the other hand, though the Ld. DR relied upon the order passed by the authorities below and has not been able to controvert the submission made by the Ld. A.R. 6. The brief facts leading to the case is this that the assessee an individual filed its return of income on 14.12.2015 declaring total income at Rs. 3,33,580/- which was processed under Section 143(1) and finalized on 19.01.2016 upon accepting the returned income. Subsequently the case was selected for scrutiny under CASS and notice under Section 143(2) of the Act was issued on 29.07.2016 followed a fresh notice under Section 143(2) dated 09.09.2016 due to transfer of the case to the office of the ITO, Ward3(2)(5), Ahmedabad and a further notice under Section 142(1) of the Act alongwith a questionnaire for necessary compliance. 7. After going through the reason for scrutiny selection and the information made available it was prima facie noticed by the AO that the assessee has indulged in bogus long term capital gain of Rs. 73,48.101/....

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....gwandas & Co. and has not been provided to us since it was mutually agreed to for pool holding account, and therefore, there is no question of any physical share certificate, which is at Page No.7. v. Detailed assessee's account in the books of Vijay Bhagwandas & Co. is at Page No.8 for payment of Rs. 1,03,850/- for 2850 shares. vi. Trade Bull securities Pvt. Ltd. - Contract-cum-tax invoices are as per Page No.9 to 26, more particularly, page No.17 for Lifeline Drugs & Pharma. vii. Assessee's bank account with Citibank is at Page Nos. 27 to 35 and Citibank ledger Account is at Page No.36. viii. Copy of cash book of the assessee for F.Y.2013-14 is at Page No.37, out of which cash has been given. ix. Details of SBI, PPF passbook are at Page Nos.38 to 44, out of which PPF has been deposited and claimed exemption."   10. It is relevant to mention that the assessee purchased the shares of the said company from the stock broker M/s. Vijay Bhagwandas & Company. The assessee's case before the authorities below is this that the claim of Long Term Capital Gain (LTCG) on the sale of listed securities was after the payment of the Securiti....

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....ies namely M/s Life Line Drugs & Pharma Ltd (LLDP) and M/s Mahavir Advance Remedies Ltd (MARL) was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph. Subsequently, the learned CIT (A) upheld the finding of the AO. 8.1 Indeed, the price of the share of LLDP was increased from Rs.18 to Rs. 242 and share price of MARL was increased from Rs. 7.77/- to 348.7/- within just a period of 12 months which was not believed by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to the doubt about such increase in the price. But in our considered view, this cannot be sole criteria for reaching to the conclusion that the price were rigged up to generate the long-term capital gain which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in details and the same cann....

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.... account. Shares are transferred through Demat account. The assessee does not know the buyer. (v) There is no evidence that assessee has paid cash to purchase LTCG. (vi) The assessee is not a party in the alleged rigging up the prices of the shares. He has no nexus with the company, its directors or operators. He is not concerned with the activity of broker and has no control over the same. (vii) It may have got only incidental benefit of price rise. (viii) The purchase and sale of shares have been duly recognized by the concerned company. They are also reflected in the balance sheet of the assessee. (ix) The assessee invested in penny stocks which gave rise to huge capital gains in a short period, does not mean that the transaction is bogus as all the documents and evidences have been produced. (x) Opportunity of cross examination was not given which was essential for deciding the issue on hand. 8.5 In our view, just the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to prove that the as....

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..... Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions 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....

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....ordingly, no question of law arises." 8.8 We also note that the co-ordinate bench Mumbai Tribunal in case of DCIT vs. M/s Jiana Investments bearing ITA No. 4286 to 4474/Mumbai/2019 where the assessee has loss on sale of Share of M/s MARL which was disallowed by the AO by holding the such script was penny stock and assessee employed operandi of penny stock and incurred losses to provide accommodation LTCG to beneficiaries. The AO in holding so relied upon the information received from the directorate of investigation wing. However the learned CIT(A) deleted the addition by observing that information received from investigation only a general modus operandi employed by the various entry operators but no evidences available that the particular assessee was involved in such scam. Without bringing cogent material establishing the assessee earned or incurred bogus gain or losses the AO cannot made addition merely on the basis of suspicion or assumption. The view taken by the learned CIT was confirmed by the Hon'ble bench of Mumbai ITAT. It is pertinent to mentioned that the script involve in the above case is also in the present case. Thus we also find support and guidance from ....