TaxTMI 
TaxTMI 
2024 (7) TMI 709
X X X X Extracts X X X X
X X X X Extracts X X X X
....C) has erred in upholding the order of the Ld. Assessing Officer (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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he record (in short, 'APB'). The assessee first invited our attention in the assessment order page 40, para 12. The Ld.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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idavit of the ; Regional Director in which it is stated that:- "(a) Clause 2 (k) (e) page 22-33 of the Scheme, states that "the difference between Net Assets Value i.e. Bank value of /Assets minus liabilities (including reserves) of the Transferor 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court (O.S.), Bombay, with the concerned Superintendent of Stamps for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of order. 12. Petitioners are directed to file a copy of this order alongwith a copy of the Scheme of Amalgamation with the concerned 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arwal as reproduced as under:- Q 4. Whether M/s Comfort Securities Pvt. Ltd. or you have any association with the following companies or have ever had any business transactions with the companies as mentioned below: 1. First Financial Services Ltd. (FFSL) 2. Splash Media and Infra Ltd. ( SPMIL) 3. D B (International) stock Brokers Ltd. ( DBSBL) 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 I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....refore, as on 18.06.2012 the assessee was holding 3,50,000 equity shares of M/s Rutron International Ltd. in D-mat account. This fact of holding the shares in the D-mat account as on 18.06.2012 cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has not disputed the sale of 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re Technologies Ltd. as per swap ratio approved in the scheme and consequently the assessee was allotted 5 lacs share of Rs. 1/- each on M/s Luminaire Technologies Ltd. The evidence produced by the assessee leave no scope of any doubt about the holding of the shares by the assessee. 8. As regards the purchase consideration when the assessee has shown the share application money paid through his bank account and the AO has not brought on record any material to show that apart from the share application money paid through 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmoned them if the examination of the officers were considered as necessary by the AO. Hence, it was improper and unjustified on the part of the AO to asked the assessee to produce the principal Officers of those companies. As regards the non grant of opportunity to cross examine, the Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue has held in para 5 to 8 as under: "5. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior 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, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erious flaw which renders the order a nullity. The Mumbai Special of the Tribunal in case of GTC Industries vs. ACIT (supra) had the occasion to consider the addition made by the AO on the basis of suspicion and surmises and observed in par 46 as under:- "46. In situations like this case, one may fall into realm of 'preponderance of probability' where there are many probable factors, some in favour of the assessee and some may go against the assessee. But the probable factors have to be weighed onmaterial facts so collected. Here in this case the material facts strongly 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. The Hon'ble Jurisdiction High Court in case of CIT vs. Smt. Pooja Agrawal (supra) has upheld the finding of the Tribunal on this issue in para 12 as under:- "12. However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under: - "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 sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n about the transaction in question in statement of Sh. Pawan Purohit. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ TTA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igation 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 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 transacti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er share. These shares were claimed to have been sold on July 7, 2000, July 14, 2000 and July 21, 2000, at an average value of Rs. 33.81 per share. In the assessment year in question, the assessee offered to tax the capital gains arising from the sale of the above shares, amounting to Rs. 9,84,909 as a long-term capital gain. The same were accepted. 6. Subsequently, on January 20, 2005, there was a search action in the case of various assessees belonging to a group known as Haldiram group. It appears that on March 30, 2005, the group offered additional income of Rs. 2 crores, out of which Rs. 3 lakhs were offered in the hands of the assessee in Income-tax Appeal No. 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 sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oceeds by cheques/DD pays Mr. X, the same proceeds by cheques/ DD pays Mr. X the same amount by cash (No. 2 account), i.e., Rs. 100 and Mr. X pays the same to Mr. C. In this way, Mr. A converts the black money into white and avails of long-term capital gain." (c)The sale transactions were off-market transactions and the Calcutta Stock Exchange by its letter dated May 26, 2005, has confirmed that quite a few of the transactions carried out by Shri Pradeep Kumar Daga were not borne on the records of the exchange and that the details noted on some of the other contract notes did not match. (d)There were unexplained cash credits in some of the buyer's bank accounts prior to issuance of cheques to the assessees. 11. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecision relied upon by the counsel for the Revenue is wholly distinguishable on the facts. 16. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on findings of fact. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs." 4.6. CIT vs Mukesh Ratilal Marolia (Bom)ITA No 456 of 2007 dated 07/09/2021. The relevant paragraphs are reproduced as below:- "3 The Assessee was carrying on business of manufacturing handkerchiefs as the proprietor of Rumal Manufacturing Company. In the Assessment Year in question the Assessee claimed that he had sold the shares of four companies, namely, M/s Alang Industrial Gases Ltd., Mobile Telecommunication Ltd., M/s Rashel Agrotech 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 an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s a finding of fact by the Tribunal that the transaction of purchase and sale of the shares 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. Waive placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-! vs. NRA Iron & Steel (P.) 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee. 4.3. The ld. AO issued a show cause notice to the assessee wherein he sought to deny the claim of exemption u/s 10(38) of the Act treating the transactions as bogus and merely accommodation entries and also adding some commission on an estimated basis thereon. In response to the said notice, the assessee furnished a detailed written submission vide letter dated 05/12/2017 and gist of those submissions were summarized by the ld. AO as under:- a. The assessee denies that any operator has approached him directly or indirectly. Securities and Exchange Board of India (SEBI in short) has investigated the allotment of preference shares by Radford Global Ltd, and has not found any adverse evidence/findings relating to 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. b. The so-called price rigging 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....visions of SEBI (Prohibition of Fraudulent & Unfair Practices relating to security market) Regulations, 2003 in the case of Radford Global Ltd. j. It is known fact and a practice in general that whenever a person subscribes to an IPO, the investment is not done before perusing any financials. The investment is based purely upon market hear say. The assessee admits of having invested in the company inspite of weak financials but at the same time it needs to be appreciated that share market is known for fetching returns when the stock is weak and price & volume is bleak. It is therefore known as Market of Opportunities. k. During the course of search action not an inch of paper was found to suggest that the assessee has any unaccounted source of income to buy long term capital gains from accommodation providers. No evidence was found to show that the investment in Blazon Marble Ltd or Radford Global Ltd was bogus or in the nature of accommodation. The search action is 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....109/- as unexplained cash credit u/s 68 of the Act by treating the same as an accommodation entry and also added an amount of Rs 50,46,247/- on account of unexplained commission expenditure incurred u/s 69C of the Act at the rate of 6% of sale proceeds of Rs 8,41,04,109/- on the following reasons:- 15. CONCLUSION :- 15.1 The following points summarise that Blazon Marbles Ltd. & Radford Global Ltd. are bogus penny stock companies: * The business profile and financials of Blazon Marbles Ltd. & Radford Global Ltd. show that the company was not engaged into any substantial activity, esp. when the preferential shares were allotted. It is also seen that the company was not having any future plans which could attract investors from all over India to invest in the company. * The whole process of preferential allotment was a prearranged and managed process so as to allot preferential shares to beneficiaries of bogus LTCG/STCG. * The reported profits were also not commensurate with the price rise. The shares were rigged on the Stock Exchange. The price of Blazon Marbles Ltd. & Radford Global Ltd. has moved in absolute disregard to the general mark....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is oozing out that merely a paper work was camouflaged by the assessee. 15.3 Thus, based on the above mentioned facts and circumstances, the revenue has sufficient, cogent, tangible, reliable, authenticated proof to show that Long term capital gains booked by assessee in his books were prearranged method to evade taxes and launder money which can be summarized as follows: a. Failure of Assessee to discharge his onus: assessee has been unable to provide any explanation or rationale behind the preferential/off-market allotment/purchase of the shares of the said penny stock. The assessee has not been able to prove the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. b. Ignorance of the assessee about shares and penny stock companies: Assessee has failed to show of having any knowledge about the shares traded and having any knowledge about the fundamentals of the penny stock companies. Assessee is unable to satisfactorily explain the reasoning behind off-market acquisition of the shares of the said bogus company which lack....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmitted on oath by various accommodation entry providers that for accommodation entries in the nature of LTCG they charge commission ranging from 4% 6%, thus 6% of the sale consideration is being taken as the unexplained expenditure incurred by the assessee for arranging the accommodation entries. 15.5.2 In view of the above facts it is crystal clear that the assessee utilized his unaccounted cash to obtain the above said bogus LTCG. Since it has been admitted by various accommodation entry providers that for providing accommodation entries in the nature of bogus LTCG they charge a commission ranging from 4% to 6%, it is logical that the assessee also paid commission in cash to the accommodation entry providers. In light of the above facts and evidences, the said alleged LTCG and claim of exemption u/s 10(38) is hereby rejected." 15.6.1. In the light of the facts & discussion in the preceding paragraphs, I am of the opinion that the transactions of purchase & sale of 97000 shares of Blazon Marble Ltd & 1000000 shares of Radford Global Ltd leading to generation of exempt long term capital gains are not genuine transactions. The transactions in the shares of Blazon ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en offloaded to exit providers and not genuine investors. In light of the fact that the transactions are managed through synchronised trading and are not genuine transactions even though conducted on the Stock Exchange, the gain made by the assessee is required to be taken as bogus Long Term Capital Gain. 7.35. In light of the above discussion, the claim by the assessee that the addition has been made merely on presumption and without any evidence is not found acceptable. The reliance placed by the AO on the decisions in case of SumatiDayal (supra) and Durga Prasad More 82 ITR 540 (SC)is found correct. In Sumati Dayal, the Hon'ble Supreme Court has discounted the existence of well-maintained documentation as against the normal human behaviour and preponderance of probability in certain case. The appellant's case indeed falls within the same parameters. Instead of explaining the plausibility of the transaction, the appellant has merely harped on the technicalities and his impeccable documentation. In light of the improbable nature of transaction of the appellant, the AO has correctly rejected the plea of correct documentation to hold that the appellant has failed to meet th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n interim order in the case of Radford Global Ltd holding that share prices were determined artificially by manipulations ; that these are close circuit transactions and are pre-structured; that assessee had failed to discharge his onus cast on him ; that net worth of Radford Global Ltd and Blazon Marbles Ltd is negligible and that its share prices were artificially rigged ; that investigations prove that cash is routed through various accounts to provide these bogus long term capital gain entries. The ld. AO by making these observations proceeded to treat the sale proceeds of the shares as unexplained cash credit u/s 68 of the Act. Since the receipt of sale proceeds was treated as bogus, the ld. AO also proceeded to add estimated commission @ 2% for arranging the said bogus transaction as unexplained expenditure u/s 69C of the Act. 5.1. At the outset, we find that the documentary evidences submitted by the assessee were found to be genuine and no adverse inferences were drawn by the revenue on the same. The transactions were carried out by the assessee in the secondary market through a registered share broker at the prevailing market prices. Payments were received by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the assessees. Similarly, the sale of the shares of the respective buyer was 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 was seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions could not be a ground to treat the transactions as sham transactions. On a perusal of those documentary evidences, the Tribunal had arrived at a finding of fact that the transactions were genuine. Nothing was brought to notice of the Court that the findings recorded by the Tribunal were contrary to the documentary evidences on record. Therefore, no substantial question of law arose from the order of the Tribunal. 5.5. We find that independent enquiries were conducted by SEBI and SEBI had passed an interim order dated 19/12/2014 in the case of Radford Global Ltd, wherein the assessee and Radford Global Ltd were restrained from accessing the securities market, either directly or....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Global Limited is reflected in Serial Number 1 which is also part of 82 entities acquitted by SEBI, on whom clean chit has been given. 5.5.2. With regard to Blazon Marbles Ltd, we find that though an order was passed u/s 15I of SEBI Act, 1992 by SEBI on 13/10/2017, the same was passed only for levying penalties on certain persons for making procedural violations and for non-appearance to the summons issued by SEBI. The said order of SEBI does not allege any involvement of the assessee herein with the manipulation of share prices. 5.6. We find that the assessee had held the shares in the instant case for 33 months in the case of Blazon Marbles Ltd and for 15 to 17 months in the case of Radford Global Ltd and then sold the shares in the open market at prevailing market prices. From the above order of SEBI, it is very clear that SEBI, based on its investigations and replies given by various parties, had ordered either to take action against certain parties or had acquitted certain parties on the ground that they are not involved in the price manipulation. In any case, the assessee's name or the broker, through whom assessee transacted had not figured in the said lis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vested by the assessee in Blazon Marbles Ltd. 5.8. Hence the entire addition has been made merely by placing reliance on the Kolkata Investigation Wing report which are more general in nature and does not implicate the assessee herein in any manner whatsoever. We are unable to persuade ourselves to accept to the contentions of the ld. DR that Kolkata Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO is also consequent to the aforesaid impugned addition, therefore, the said addition is also directed to be deleted. 5.9. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus. In our considered opinion, the ld. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of ours is further fortified by the decision of Hon'ble Delhi High Court in the case of PCIT vs Laxman Industrial Resources Ltd in ITA No. 169/2017 dated 14/03/2017. It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law. 5.12. We find that the ld. CIT(A) relied on the decision of Hon'ble Delhi High Court in the case of Suman Poddar vs ITO reported in 112 taxmann.com 329 dated 17/09/2019 where the decision was rendered in favour of the revenue. The Special Leave Petition filed by the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rversity 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. 5.14. We find that the ld. DR had relied on the decision of Hon'ble Calcutta High Court in the case of PCIT vs Swati Bajaj reported in 139 taxmann.com 352 which is an elaborate decision rendered after considering various decisions of various High Courts on the subject. In the said decision, it was held that assessee had to establish the genuineness of rise of price of shares within a short period of time that too when general market trend was recessive. But we find that when there are several decisions of Hon'ble Jurisdictional High Court as stated supra are already in favour of the assessee, the same would prevail over this tribunal and this tribunal need not take cognizance of the Hon'ble Non-Jurisdictional High Court. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. 6. The Ground No. 3 raised by the assessee is challenging the levy of interest u/s 234B and 234C of the Act, which would be consequential in nature and does not require any specific adjudication. 7. The Ground No. 4 raised by the assessee is challenging the initiation of penalty proceedings u/s 271(1) (c ) of the Act, which would be premature for adjudication at this stage. Hence dismissed. 8. In the result, the appeal of the assessee Shri Yogesh Popatlal Thakkar in ITA No. 1605/Mum/2021 for A.Y. 2014-15 is partly allowed.". 5. The Ld.DR vehemently argued and fully relied on the order of revenue authorities. The Ld. DR invited our attention in appeal order, page 23, paragraph 6.2.7 which is reproduced as below: - "6.2.7 Appellant does have the documents such as contract notes; undertaking share sale through the stock exchange, routing it through the banking channel and Demat accounts to indicate that the transaction is completely genuine. However, when ones looks behind the surface, it is seen that the concerned share script which made the appellant wealthier by 2.55 crores on her investment of 5 lakh by giving her 2.5 crores in return was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry appreciative of the manner in which the bunch of appeals have been disposed of. The cardinal principles which courts and tribunal have followed consistently is that each assessment year is an individual unit and unless and until it is shown that there are distinguishing feature in a particular assessment year, the decision taken for the earlier years are to be followed to ensure consistency. While doing so the Courts/Tribunals are required to examine the facts and render a finding as to why the decision in the earlier assessment years should be adopted or not." 52. Apart from the above, the Hon'ble Court noted that the assessee had never mentioned before the AO that, he wanted the copy of investigation report or the statements of the brokers/entry operators and therefore the assessee's plea regarding non-availability of relevant material or denial of cross-examination claimed was rejected. The relevant observation of the Hon'ble High Court is as under: "...Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the enquiry which is being conducted ....