TaxTMI 
TaxTMI 
2024 (7) TMI 709
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficer (AO) in Rs. 2,54,98,050/- under section 68 of the Act, without appreciating the ; p facts that the appellant has sold the quoted shares through a recognized stock broker, SIT paid and the payment was through a banking channel, hence the capital gains exempt under section 10(38) of the Act cannot be assessed under section 68 of the Act. 1.2. Without prejudice to the above, that on the facts and circumstances of the case arid in law the Ld. NFAC has erred in upholding the order of the Ld. AO in making an addition of Rs. 2,54,98,050/- under section 68 of the Act by alleging that the sale of shares of Luminaire Tech Limited was a sharn transaction by relying on the statements of Mr. Brijesh Bhagat arid Mr. Deepak Patwari without providing the appellant with a copy of the statements and an opportunity of cross-examination as the order passed which was affirmed being in violation of principles of Natural Justice i.e., Audi Alteram Partem, the addition confirmed under section 68 of the Act may be deleted. 1.3. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in upholding the order of the Ld. AO in making an addition of Rs. 2,54,98,050/- under sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AR placed that the entire transactions were made by the assessee through the proper stock exchange and by purchasing the shares and sold them to the market. The Ld.AR placed that assessee purchased 2 lakh shares of M/s Paridhi Properties Ltd (PPL) at cost of Rs. 10 per share which is amounting to Rs. 20 lakhs., in March 2014. Later on, M/s Paridhi Properties Ltd merged with Luminaire Technologies Ltd which allotted 20 lakhs equity shares at face value of Rs. 1/-. Out of the 20,00,000 shares, 47,2000 shares were sold during March 2013, within a gap of 10-12 days amounting to Rs. 2,50,24,074/-. Considering the period for holding the assessee's claimed long term capital gain exemption u/s 10(38) of the Act. The relevant documents like bank transaction, share transaction copy, paid through STT, ledger and demat account were duly submitted before the revenue authorities. The Ld.AR relied on the order of the Hon'ble jurisdictional High Court and the Tribunal which are as follows: - 4.1. Luminaire Technologies Limited. order dated 27/07/2012, CSP 275 of 2012 Connected with Company Summons for Direction No 77 of 2012. "IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JUR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sferor Company as on appointed date and equity share capital issued to the shareholders of Transferor Company on amalgamation by the Transferee Company shall be'-credited/ debited by the Transferee Company to its General Reserve/Goodwill Accounts as the case may be General Reserve shall constitute as free reserve as if the same was created by the Transferee company out of its own earned and distributable profits." In this connection it is submitted that the reserve shall not constitute as free reserve as per section 2(29) of the Act and the same be styled as "Capital Reserve" by the Transferee Company. (b) In Clause No. 13 the Scheme the period fixed for approving the scheme is by 31/03/2012 which has already expired. In this connection Board of Directors of the petitioner companies may be directed to take necessary steps to extend the date by passing board Resolution before giving effect to the Scheme. (c) Clause 6 of the Scheme deals with change of Objects of the Memorandum of Association of the Transferee Company. In this connection, the Transferee Company may be directed to comply with provisions of section 40 read with section 18 of the Act and to file amended copy of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Registrar of Companies, electronically, along with E-Form 21 in addition to physical copy within 30 days from the date of issuance of the order by the Registry 13. The Petitioners in both Petitions to pay costs of Rs. 10,000/- each to the Regional Director. Petitioner in Company Scheme Petition No. 275 of 2012 to pay sum of Rs. 10,000/- to the Official Liquidator, High Court, Bombay toward his Costs. Costs to be paid within four weeks from today. 14. Filing and issuance of the drawn up order is dispensed with. 15. All authorities concerned to act on a copy of this order along with Scheme duly authenticated by the Company Registrar, High Court (O.S.), Bombay. (S.J. KathawallaJ.)" 4.2. Purushottam Soni v. ITO ITA 368-372/JP/21017 dated 27/11/2017 (JP Trib). The relevant paragraphs are reproduced as below:- "We further note that an identical issue was considered by the Coordinate Bench of this Tribunal in the case of Pramod Jain and Others vs. DCU vide order dated 31st January, 2018 in ITA No. 368/JP/2017 as well as in the case of Shri Meghraj Singh Shekhawat vs. DCIT vide order dated 7th March, 2018 in ITA No. 443 & 444/JP/2017 in paras 5 & 6 as under:-. "5. We have con....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. Unisys Softwares & Holdings Industries Ltd. (USHL) 5. Fact Enterprises Ltd. ( FEL) 6. Parikh Herbal Ltd. ( now Safal Herbs Ltd) 7. Premier Capital Service 8. Rutron Internationa Ltd. 9. Radford Global Ltd 10. JMD Telefilms Industries Ltd \. 11. Dhanleela Investments & Trading Co. Ltd. 12. SRK Industries Ltd. 13. Dhenu Buildcon Infra ltd. Ans. M/s Comfort Securities Ltd has business nexus with the following companies Name of the Company Nature of Business Transaction 1. First Financial Services Ltd. Brokerage and Consultancy Services 2. Splash Media and Infra Ltd. Brokerage, Share Holding and Consultancy Services 3. Fact Enterprises Ltd Broking as well as share holding 4. Rutron International Ltd. Consultancy Services 5. D.B. (International) Stock Brokers Ltd. Consultancy Services 6. Unisys Software & Ho/ding Industries ltd. Broking Services Apart from the above mentioned companies neither I nor M/s Comfort Securities Ltd. has any business nexus with the companies mentioned supra. Q5. Do you know the promoters and directors of the above said companies? Whether M/s Comfort Securities Pvt. Ltd. or you have any association with the promot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee, therefore, once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Shri Anil Agrawal recorded by the Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee. Further, Shri Anil Agrawal was not a director of M/s Rutron International Ltd. as perceived by the AO and therefore, the entire finding of the AO is without any corroborative evidence or tangible material." 4.3. Pramod Jain & Ors vs. DCIT ITA 368-372/JP/2017 dated 27/11/2017 (JP-Trib). The relevant paragraphs are reproduced as below:- "7. In case of equity shares M/s Paridhi Properties Ltd. the assessee purchase 50,000 equity share on 26.03.2011 by paying share application money of Rs. 5 lacs whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh bank account the assessee has brought his own unaccounted money back as long term capital gain. It is also pertinent to note that the shares of M/s Oasis Cine Communication Ltd. are still held by the assessee in its demat account to the extent of 17,200 shares and therefore, the holding of the shares by any parameter or stretch of imagination cannot be doubted. The AO has passed the assessment year based on the statement of Shri Deepak Patwari recorded by the Investigation Wing of Kolkata however, the assessee has specifically demanded the cross examination of Shri Deepak Patwari vide letter dated 15.03.2016 specifically in paras 3 and 4 as reproduced by the AO at page No. 7 of the assessment order as under:- "3. Since, the shares were allotted by the company through private placement after completing the formalities of ROC and were sold through the recognized Bombay Stock Exchange (BSE) there is no question of knowing individual persons or company official personally in the whole process, so the assessee is not in position to produce any one for cross examination before your good self. Since your good self has got the authority, we humbly request you to kindly issue the noti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enior counsel who appeared for the Revenue, 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....indicate a probability that the wholesale buyers had collected the premium money for spending it on advertisement and other expenses and it was their liability as per their mutual understanding with the assessee. Another very strong probable factor is that the entire scheme of 'twin branding' and collection of premium was so designed that assessee-company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that Assessee-Company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: - "Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce & Ind. Ltd., assessee's account with P.K. Agarwal & co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erm capital gain as shown by the appellant."...... In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account." 4.4. CIT vs Shyam R Pawar [2015] 54 taxmann.com 108 (Bom) "5. We have perused the concurrent findings and on which heavy reliance is placed by Mr.Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dit of share transaction. The contract notes in Form-A witr brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with 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 para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 41 of 2010 for the assessment year 2004-05 and Rs. 7 lakhs in the assessment year 2005-06. 7. The Assessing Officer on the basis of the seized material issued notice under section 153A of the Income-tax Act, 1961, for the assessment year 2001-02 and subsequently passed an assessment order under section 153A read with section 143(3) of the Income-tax Act, 1961, on December 20, 2006, wherein the Assessing Officer computed the total income by disallowing the long-term capital gain and added the entire sale proceeds received on sale of shares amounting to Rs. 10,14,324 as income from undisclosed sources under section 68 of the Income-tax Act, 1961. 8. On appeal filed by the assessee, the Commissioner of Income-tax (Appeals) by his order dated April 19, 2007, held that section 68 of the Act is not applicable to the facts of the present case and accordingly deleted the addition by following his decision in the case of Kamal Kumar Agrawal for the assessment year 2002-03. 9. On further appeal filed by the Revenue, the Income-tax Appellate Tribunal by a common order dated July 24, 2009, dismissed all the 70 appeals filed by the Revenue, the lead matter being the appeal against Kamal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. 12. From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. 13. The statement of Pradeep Kumar Dag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otech Ltd. and M/s. Sentil Agrotech Ltd, which were purchased during the year 1999-2000 and 2000-2001. The entire sale consideration amounting to Rs. 1,41,08,484/- was utilised for the purchase of a flat at Colaba, Mumbai and accordingly benefit of section 54E of the Income Tax Act, 1961 was claimed. 4 The Assessing Officer has held that neither the purchase nor sale of shares were genuine and that the amount of Rs. 1,41,08,484/- stated to have been received by the Assessee on sale of shares was undisclosed income and accordingly made addition under section 69 of the Income Tax Act, 1961. The Appeal filed by the Assessee was dismissed by CIT (A). 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 2000-2001 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....) Ltd.1 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. The appeal is devoid of merits and it is dismissed with no order as to costs." merit in this Appeal and the same is dismissed with no order as to costs." 4.7. Yogesh P Thakkar vs DCIT, ITA No.1605/Mum/2021 dated 3/2/2023 (Mum-Trib). The relevant paragraphs are reproduced as below: - 4.1. The assessee was allotted 2,00,000 shares of M/s. Radford Global Ltd. on 12/02/2013 having a face value of Rs. 10/- and a premium of Rs. 5/- per share on preferential basis and consideration paid thereon was Rs 30,00,000/-. Subsequently, the shares having face value of Rs. 10/- were split into 5 shares having face value of Rs. 2/- per share. Post split, the total shares credited into demat account were 1000000 shares. During the year under consideration, the assessee has sol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gging in the shares of Blazon Marble Ltd. was never in the knowledge of the assessee The shares of the said company were traded on the floor of the stock exchange and all the transactions were in the knowledge of stock exchange. c. From the computation of the capital gains in the show cause notice, it is seen that no adverse inference or observation has been made about discrepancy in any figures. The show cause carries no negative comment and is silent on the documents submitted in the course of the assessment proceedings. It implies that the documents have been perused, examined and the genuineness of the documents is not doubted. d. Data has been given in the show cause to establish that the increase in the share prices of Blazon Marbles Ltd & Radford Global Ltd was not commensurate with financial results. It is submitted that the shares on the bourses work on market sentiment rather than the financial results. The Stock Exchange is full of many such companies where inspite of weak financial results, the shares hold good prices. e. None of the people examined by the Investigation Wing have stated the name of the assessee in their depositions or that the investigation has re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the ultimate tool available with the department to discover evidence of unaccounted transaction and unaccounted assets. If in a search action no evidence was found of any wrong doing by an assessee, to bring to tax a genuine transaction by treating it as bogus based on assumptions and surmises will not only be unjust but also unfair. l. The assessee denies the allegation that the capital gain earned is bogus. The assessee denies involvement of any broker for facilitating bogus long term capital gain shares. The only brokerage paid by assessee is on sale of shares duly documented by broker bills which has been placed on record. No link of the assessee has been established with any person who have engaged in providing LTCG to assessee. 4.3.1. There was an Ad Interim Ex-parte order dated 19/12/2014 passed by SEBI in case of Radford Global Ltd. wherein it was alleged that the LTCG earned by various allottees on preferential basis were not genuine. The assessee's name being preferential allottee, was also included in the said order vide serial number 57. Accordingly, the said company i.e Radford Global Ltd and the assessee together with various other parties were restrained from a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere rigged on the Stock Exchange. The price of Blazon Marbles Ltd. & Radford Global Ltd. has moved in absolute disregard to the general market sentiments. * Various share brokers have confirmed the fact that the shares of Blazon Marbles Ltd. & Radford Global Ltd. have been used for providing entry of bogus LTCG/STCG. * During this period of price rigging, the volume of the shares traded on each trading day was very low and on each day just 1-2 trades have been done with a constant rise in the price of the shares which was kept just short of the circuit limit for price rise as per the exchange guidelines. * Various Exit Providers have confirmed that they have purchased the shares of Blazon Marbles Ltd. & Radford Global Ltd to provide entries of bogus LTCG/STCG. * The Statements on oath of Exit Providers constitutes a strong testimony in order to establish the manipulation of the said scrip leading to conversion of unaccounted income into bogus LTCG/STCG through accommodation entries by various beneficiaries including the assessee group. 15.2 Reliance is placed on the recent judgement of the Nagpur Bench of the Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing behind off-market acquisition of the shares of the said bogus company which lack any fundamentals, which he has never visited, whose promoters/directors she has never met, whose meetings she has not attended and whose business activities also are not known to him. c. Financial analysis of the penny stock companies: The net worth of the penny stock company is negligible. Even though the net worth of the company and the business activity of the company is negligible the share prices have been artificially rigged to unusual high. No genuine motive based on which assessee had decided to invest in the said penny stock which lacked any financial fundamentals. d. Cash trail in the accounts of the entry providers: The investigations in the fund flow analysed in the accounts of the entry providers have established that the cash has been routed from various accounts to provide accommodations to assessees. e. Arranged transactions: The transactions entered by the assessee involve the series of preconceived steps, the performance of each of which is depending on the others being carried out. The true nature of such share transactions lacked commercial contents, being artificially str....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons in the shares of Blazon Marble Ltd & Radford Global Ltd were purely operator driven where the share price was pushed up to a level by the operator where the beneficiary who bought the shares at a nominal price sold it to a dummy paper company of the operator and generated huge exempt long term capital gains for the beneficiary. The assessee has converted his undisclosed income into disclosed tax exempt income during the previous year relevant to the assessment year 2014-2015. Hence the entire amount of Rs. 8,41,04,109/- purported to have been received by the assessee on sale of 97000 shares of Blazon Marble Ltd & 1000000 shares of Radford Global Ltd is treated as unexplained cash credits and charged to tax u/s 68 as the income of the previous year relevant to the assessment year 2014-2015. Alternatively, this amount is also chargeable to tax as the undisclosed income or income from undisclosed sources of the assessee for the previous year relevant to the assessment year 2014-2015. Penalty proceedings u/s 271(1)(c ) are initiated as the assessee has furnished inaccurate particulars of his income. 15.6.2 There is a cost attached to getting undisclosed income converted into disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e onus cast u/s 68 and that the credits in the books remain unexplained. He has rightly treated the amount as the income of the appellant under section 68 of the Act. 7.36. In light of the above discussion, it is held that the amounts credited in the books of the assessee as long-term capital gains during the year arising out of the sale of scripts M/s. Blazon Marbles Ltd. and M/s. Radford Global Ltd. remain unexplained and the AO has rightly treated the amount as unexplained cash credit in the books of the assessee. The ground no. 3 is decided against the assessee and is dismissed." 4.5.1. The ld. CIT(A) confirmed the addition of unexplained commission expenses u/s.69C of the Act of Rs 50,46,247/- giving finding as under:- "8.4. While dealing with ground no. 3 of the appeal, it has been held that the assessee has availed of accommodation entry from such entry providers in the form of tax-exempt long-term capital gains. It is natural that such entries are provided for a commission. The AO has estimated a rate of 6% which does not appear to be excessive or unreasonable. As such, I find no reason to interfere with the addition made by the AO on this issue. Ground no. 4 raised b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the stock exchange through the registered broker. Amounts received on sale of shares were duly subjected to levy of Securities Transaction Tax (STT) at the applicable rates. 5.2. We find that no enquiries were carried out by the revenue either on the broker or with the stock exchange with regard to transactions carried out by the assessee. The revenue had merely relied on the Kolkata investigation report without linking the assessee with the various allegations leveled in the said investigation report. 5.3. We find that the revenue had not proved with any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators. 5.4. It is not in dispute that the assessee had made purchase of shares in off-market either through preferential allotment of shares by the concerned company or from purchasing from an existing shareholder....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... completed. After completion of the final investigation, SEBI had passed a final order dated 20/09/2017 in the case of Radford Global Ltd clearly acquitting 82 persons which admittedly included the assessee and the company Radford Global Ltd on the plea that they were not involved in artificial price rigging of shares. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices. The relevant operative portion of the SEBI order dated 20/09/2017 is reproduced hereunder:- 10. Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 are liable to be revoked. 11. In view of the foregoing, I, in exercise of the powers conferred upon me under Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s merely a gullible investor, who had resorted to make investment in the shares of Radford Global Ltd and Blazon Marbles Ltd based on market information and had sold the shares in the secondary market in prevailing market prices. It is not the case of the revenue that assessee herein had directly sold the shares in the secondary market with clear knowledge of the name of the person to whom the said shares were sold. In secondary market transactions, the buyer and seller are not supposed to know each other unless it is a case of "block deals‟. Same is the case of the assessee herein. Admittedly, the assessee's case does not fall under the category of "block deals". 5.7. We find that one of the findings of ld. CIT(A) in page 70 para 7.23 is that assessee does not have elaborate experience in share trading and that the isolated investment made by the assessee is in Radford Global Ltd and Blazon Marble Ltd. This is factually incorrect as assessee has been regular in making investments in various scrips which is evident from the demat statement furnished on record by the assessee. Infact the assessee had duly furnished the demat statement for the period 01/04/2012 to 31/03/2014 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee or his broker is not one of the parties who had been proceeded against by SEBI, the transaction carried out by the assessee cannot be termed as bogus. We find that the revenue had primarily relied SEBI interim order dated 19/12/2014 passed in the case of Radford Global Ltd. This SEBI Interim order is subsequently revoked on 20/09/2017 duly acquitting the assessee as stated supra. Before completion of assessment, the assessee had furnished the SEBI final order dated 20/09/2017 duly acquitting the assessee before the ld.AO, which was completely ignored by the ld. AO. We find that SEBI vide its final order dated 20/09/2017 acquitting certain persons including the assessee herein together with the company Radford Global Ltd was duly brought to the notice of the ld. AO which had been ignored by the ld. AO while framing the assessment. This aspect was subject matter of adjudication by the Co-ordinate Bench of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce has been brought on record to establish any link between the assessee herein with the entry operators who were allegedly involved in price rigging of shares artificially or any other person named in the assessment order being involved in any price rigging and also the exit provider. This onus is admittedly not discharged by the revenue in the instant case. 5.10. We find that the Co-ordinate Bench of this Tribunal in the case of Mukesh Ratilal Marolia vs Additional CIT reported in 6 SOT 247 (Mum ITAT) dated 15/12/2005 had held that personal knowledge and excitement on events should not lead the ld. AO to a state of affairs where salient evidences are overlooked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. We find that this tribunal decision was approved by the Hon'ble Jurisdictional High Court in ITA No. 456 of 2007 dated 07/09/2011. It is pertinent to note that the Special Leave Pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Sto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the case of PCIT vs Krishna Devi and others in ITA 125/2020 ; 130 & 131/2020 dated 15/01/2021 reported in 126 taxmann.com 80 (Delhi HC) wherein similar issue of penny stock vis a vis long term capital gain exemption u/s 10(38) of the Act was subject matter of adjudication, in favour of the assessee. This decision rendered in the case of Smt Krishna Devi considers all the propositions laid out hereinabove and are squarely applicable to the facts before us. Infact the Hon'ble High Court duly endorses the elaborate findings given by the Delhi Tribunal on various facets of the issue. Moreover, in this decision, the Hon'ble Delhi High Court duly considered the decision of Suman Poddar referred to supra and also the decision of Hon'ble Supreme Court in the case of Sumati Dayal which was heavily relied upon by the ld. DR before us also herein. The relevant operative portion of the decision of Hon'ble Delhi High Court in the case of Smt Krishna Devi is reproduced hereunder: 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his content 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTC....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecision of Nagpur Bench of Hon'ble Jurisdictional High Court in the case of Sanjay Bimalchand Jain vide order dated 10/04/2017 reported in 89 taxmann.com 196 which is against assessee. In this regard, we find that in the facts of Sanjay Bimalchand Jain, that assessee had indulged in dubious share transactions and the broker through which shares were sold did not respond to the notices issued by the ld. AO. However, in the case of the assessee herein, all the materials in support of the share transactions were duly placed on record and are in order and the ld. AO had not drawn any adverse inference on the said documents to treat them as false or fictitious. Hence this crucial distinguishing fact of Sanjay Bimalchand Jain makes it inapplicable to the facts of the case before us. Moreover, we find that the Hon'ble Jurisdictional High Court in the recent case of PCIT vs Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04/03/2022 had held as under:- 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon'ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Hence we deem it fit and appropriate to follow the decisions of Hon'ble Jurisdictional High Court referred supra wherein the impugned issue is decided in favour of the assessee. Moreover, when there are two conflicting decisions of various High Courts, the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that Construction that is favorable to the assessee should be adopted. Hence by following this principle, the decision of Hon'ble Calcutta High Court and other decisions that are rendered against the assessee, need not be followed by this Court in the peculiar facts and circumstances of the instant case. 5.15. In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of Radford Global Ltd and Blazon Marbles Ltd w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and considered the documents available in the record. The reopening was initiated only on the basis of information from the Investigation Department. The Directors of the company were duly verified by the Revenue authority. The statements are recorded. But the assessee was not able to get a link of those persons related to sale of shares. The Ld. AR submitted all relevant documents, i.e. the register, bank statement, demat account, bill copies before the authorities. But the veracity of the document has never been in question. We respectfully relied on the order of Hon'ble Bombay High Court in the case of Shyam R Pawar (supra) and Smt. Jamana Devi Agarwal (supra). During the appellate proceedings, Ld.CIT(A) relied on the order of Hon'ble Calcutta High Court in the case of Pr.CIT-V, Kolkata Vs. Swati Bajaj 139 taxmann.com 352 (Cal). But, on the other hand, the Ld.AR respectfully relied on the order of the co-ordinate bench of ITAT, D- Bench, Mumbai in the case of DCIT Central Circle- 6(2 vs Shri Dilip B. Jiwrajka, ITA No.2349/Mum/2021 date of pronouncement 29/11/2022. The findings are as follows: - 51. Apart from the above, we have also taken suo-motto judicial notice of the judg....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Hence, the facts involved in the present case are noted to be distinguishable from the above case. Further, in respect of the circumstantial evidences the Hon'ble Calcutta High Court has not disturbed the settled position of law that circumstantial evidences can be looked into only when direct evidences are not available (Para 69).In the instant case, direct irrefutable evidences were made available to the AO and, therefore, ignoring the direct evidences and jumping to circumstantial evidences is not justified even if one refers to the decision of Hon'ble Calcutta High Court. Moreover, as noted by us earlier, this issue at hand is squarely covered by the binding judgments of the Hon'ble jurisdictional High Court, in favour of the assessee, and, therefore following the judicial discipline, the order of the Ld. CIT(A) does not require any interference since we have the benefit of guidance on this subject by the Hon'ble jurisdictional High Court, which is binding upon us." There is no nexus of price rigged by the assessee himself. The money trail of the assessee and the broker is not in evidence. The entire addition was made on report of investigation wing. The evidence which is su....