AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 1404
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.... in the lead case. 3. ITA. No. 2334/Mum/2021 (Srichand Chaturmal HUF):- Brief facts are that the assessee had e-filed return of income of AY. 2014-15 on 24.07.2014 declaring total income of Rs. 22,97,160/-. Thereafter, the case of the assessee was reopened u/s 147 of the Income Tax Act, 1961 (hereinafter "the Act") by issuing of notice u/s 148 of the Act on 29.03.2017. The reasons for reopening the assessment was because the AO received information that assessee's claim of Long Term Capital Gain (LTCG) in respect of sale of shares of M/s. Kailash Auto Finance Ltd. (hereinafter "M/s KAFL") to the tune of Rs. 19,08,000/- and investment of Rs. 50,000/- (i.e. purchase value of shares of M/s. Panchshul Marketing Ltd.) are bogus; and thereafter re-opened the assessment and gave show cause as to why the same should not be added pursuant to which the assessee filed the relevant documents to prove that the purchase of shares of M/s. Panchshul Marketing Ltd and thereafter the merger of this company took place with M/s. KAFL as per the order of Hon'ble Allahabad High Court and consequent to that event of amalgamation, assessee was allotted shares of M/s. KAFL which was later sold through t....
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.... of M/s. Panchshul Marketing Ltd that said company was going to get amalgamated with M/s. KAFL. Assessee produced the documents to prove that assessee had subscribed for shares of M/s. Panchshul Marketing Ltd and was allotted the shares, in normal course and that all transaction had evidence like bill of contract, allotment letter of shares, bank statements, De-mat statements etc. And also it was brought to the notice of AO that the broker through whom assessee had transacted/sold the shares (M/s. Edelweiss Securities Ltd.) was active [even after SEBI interim order dt 29.03.2016] doing regularly its professional service as broker in the BSE & NSE, which shows that there was no restrictions placed by SEBI on its activities. Therefore, assessee pleaded before the AO that no adverse view be taken against the LTCG claim since it was a genuine investor. However, the AO did not agree and after taking note of the suspicious rise of share prices as well as taking note of the statement given by entry operators, SEBI interim order dt 29.03.2016 and investigation report against the scrip M/s KAFL, the AO was of the opinion that the assessee's LTCG claim on sale of M/s. KAFL was bogus. And the....
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....r bank statement which evidence that purchase and sale of shares took place through banking channel and that assessee is also into investment in several shares including this scrips of M/s. KAFL. The main basis for disallowing the claim of assessee regarding LTCG on sale of shares of M/s. KAFL was due to the interim order of SEBI dated 29.03.2016 wherein the SEBI restrained 246 entities from securities market for dealing with shares of M/s. KAFL & M/s. Panchshul Marketing Ltd. And the AO taking note of the Investigation Report of Directorate, Kolkata was of the opinion that certain operators were involved in rigging the price of this share whereby the beneficiaries have made huge LTCG, therefore, the AO gave notice to the assessee vide letter dated 21.09.2015, 18.04.2016 & 01.07.2016 the assessee filed the following documents to support its claim of LTCG from sale of M/s. KAFL such as under:- "(a) bills, contract for purchases of shows of M/s. Panchshul Marketing Ltd through M/s. Overflow Merchandise (b) Demat staff of holding of shares of M/s. Panchshul Marketing Ltd (c) High Court order approving scheme of amalgamation of M/s. Panchshul Marketing Ltd with M/s. K....
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....0/- shares of M/s. Panchshul Marketing Ltd (refer page no. 14 to 16 of the PB). 8. The Ld. AR also brought to my notice the Hon'ble Allahabad High Court order dated 09.05.2013 which allowed the Scheme of arrangement and amalgamation and by virtue of it M/s. Kailash Auto Finance Ltd. allotted 50,000/- shares of its shares (M/s. KAFL) in lieu of 50,000/- shares of M/s. Panchshul Marketing Ltd (refer page no. 17 of the PB). Thereafter, the Ld. AR drew our attention to Demat statement for the period from 01.07.2013 to 31.07.2013 showing the allotment of 50,000/- shares of M/s. KAFL in lieu of 50,000/- shares of M/s. Panchshul Marketing Ltd. (refer page no. 18 of the PB). The Ld. AR also brought to my notice the sale bill dated 22.11.2013 of Edelweiss Securities Ltd. for sale of 20,000/- shares of M/s. KAFL showing the sale price, their brokerage and STT charges etc. (refer page no. 19 of the PB). Thereafter, he drew my attention dated to sale bill dated 25.11.2013 of M/s. Edelweiss Securities Ltd. evidences sale of 35,000/- shares of M/s. KAFL a perusal of which shows the sale price, their brokerage and STT charges etc. (refer page no. 20 of the PB). The Ld. AR also brought to my no....
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.... with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the interim order dated March 29, 2016 and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016 and July 13, 2017 qua aforesaid 244 entities (paragraph 5 above) with immediate effect. 8. The revocation of the directions issued vide the abovementioned orders (at paragraph 7) is only in respect of the entities mentioned at paragraph 5 of this order in the matter of Kailash Auto. As regards remaining entities in the scrip of Kailash Auto, violations under SEBI Act, PFUTP Regulations, etc., were observed and SEB I shall continue its proceedings against them. Hence, the directions issued vide confirmatory order dated June 15, 2016 against the remaining 2 entities shall continue. This revocation order is without prejudice to any other action SEBI may initiate as per law." 10. The Ld. AR also drew our attention to the various Tribunal orders which has given relief to the assessee and mainly the decision to Mumbai Tribunal order ITA. No. 390/Mum/2020 for AY. 2014-15 dated 07.06.2021 wherein the Tribunal was pleased to allow the appeal of the assessee and deleted the additi....
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.... this Tribunal to interfere with the impugned order of Ld CIT(A). 14. I have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that the assessee has earned a capital gain of Rs. 19,08,000/- on the sale of scrip namely M/s. Kailash Auto Finance Ltd [M/s KAFL]. The facts qua the purchase and sale of shares and necessary evidences were already discussed hereinabove and are not being repeated for the sake of brevity. It is noted that assessee has filed all the relevant evidences comprising summary of sale and purchase of shares, contract notes/broker notes, details of Demat account/transaction statement, copies of purchase bills, evidences of payment through banking channels along with bank statements etc. It is noted that the authorities below have relied merely on the report of investigation wing and interim-report of SEBI by ignoring the relevant facts on record. In this case, it is a matter of record that when called upon by AO, the assessee had furnished all the primary evidences in the form of bills, contract notes, Demat statement and bank accounts statement to prove the genuineness of the transactions relating to pur....
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....ctively and the broker through whom the assessee purchased the scrip of M/s. Panchshul Marketing Ltd i.e. M/s. Overflow Merchandise Pvt. Ltd (item no. 123) is found in this 244 entities names. Further, as asserted by the Ld. AR that broker through whom assessee's (both) sold the shares was not even in the interim list of SEBI. I examined this fact and note from a perusal of the list of entities debarred from securities market vide interim order dated March, 2016, that the name of the broker through whom both the assessees had sold the shares of M/s KAFL i.e. M/s. Edelweiss Securities Ltd has not figured even in the initial interim order itself. Thus, it was not debarred from accessing the securities market while the SEBI interim order was in force against 246 persons/entities. Thus, I note that the main/foundational basis on which the AO had drawn adverse inference against the LTCG claim on sale of shares of M/s KAFL is not existing as per the final order of the SEBI (supra). 15. The AO has also relied on the report of the investigation wing and/or the statement of the several third party/persons recorded by the investigation wing in connection with the alleged bogus transaction....