TaxTMI 
TaxTMI 
2024 (10) TMI 581
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....n (LTCG) of Rs. 5,67,41,214/- on sale of scrip of M/s. Marigold Glass Industries Ltd (hereinafter "M/s. Marigold") which company is now known as M/s. Greencrest Financial Services Ltd (hereinafter "M/s. Greencrest"). According to the AO, he has received information from the DDIT (Inv.) Unit, Kolkata, Ahmedabad & Mumbai that the scrip of M/s. Marigold was one among the eighty four (84) penny-stocks; and AO noted the modus-operandi of unscrupulous entry providers facilitating bogus capital gain/loss for beneficiaries which he discussed at para no. 6 (page no. 4 & 5 of assessment order). Thereafter, he discussed the case of assessee regarding the claim of LTCG in sale of shares of M/s. Marigold/Greencrest from para no. 7 (page no. 5 to 18 of assessment order) where in he noted the financials of M/s. Greencrest as well as the price movement of shares in graph/chart form; and AO was of the opinion that unusual price movements depicts the price rigging resorted by the entry providers in active connivance with pre-arranged exit providers. The AO took note of the rise in closing price between 10.05.2013 and 24.06.2014 and with the help of a graph has given the date-wise price and volume of....
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.... applied the "preponderance of the probabilities human" conduct and was of the opinion that the transaction of purchase and sale of 20 Lakh shares of M/s. Greencrest (earlier known as M/s. Marigold) led to generation of exempt LTCG are not genuine transaction, hence, the entire sale consideration of Rs. 5,96,25,721/- received from sale of 20 Lakh share of M/s. Greencrest, was treated as undisclosed income of the assessee and brought to tax u/s 68 of the Act as unexplained cash credit. Further, the AO was of the opinion that the assessee might have incurred commission expenditure @ 6% of the amount purported to have been received on sale of shares of M/s. Greencrest and made an addition of Rs. 35,77,543/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to allow the appeal of the assessee and deleted the addition made u/s 68 of the Act and also the commission added by AO. Aggrieved, the revenue is before us. 4. We have heard both the parties and perused the records. We note that the assessee is an individual who earns income from salary, income from house property, income from business, income from capital gain and income from other sources. And ....
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.... payment through Banking mode (RTGS) for purchase of shares 35-37 5 Copy of allotment letter dated 12.02.2013 confirming allotment of 2000000 shares 38-40 6 Copy of Extra Ordinary General Meeting on 18.02.2023 41-43 7 Copy of share certificate dated 11.02.2013 44 8. Copy of documents related to dematerialization of shares 44-47 9 Copy of statement of Demat A/c showing credit of shares to the Demat account at Depository participant (IL&PS) 48-51 10 Copy of Depository participant (IL&PS) statement describing split effect on shares on 07.06.2014 (2,00,000 shares to 20,00,000 shares) 52-53 11 Documents showing split of shares 54 5. The assessee also produced before the AO the following primary documents to prove the sale of 20,00,000 shares of M/s. M/s. Greencrest Financial Services Ltd. (earlier known as Marigold) through the BSE electronic platform: - Sr. No Particulars Page No. of the PB 1 Copy of statement showing sale of shares 55 2 Copy of party ledger and confirmation of the same showing purchase and sale of shares by Mrs Nisha S. Pokle at Harjivandas Nemidas Securities Pvt. Ltd 55-63....
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....urchased the shares of M/s. Marigold and wondered as to how the price of shares of M/s. Marigold would have commanded a price of (approximately) Rs.90 per share within a span of two years. And thereafter, the AO was of the opinion that the prices have been rigged and shares were traded only on 137 days and only 182 trades happened during that period; and according to him rigging of prices took place on different days; and thereafter he noted the name of fourty one (41) exit providers who according to him had purchased the shares of M/s. Marigold (now known as M/s. Greencrest Financial Services Ltd) between 24.01.2012 and 01.01.2015. According to him, these forty one (41) exit providers were known accommodation entry concerns and not doing any real business, but only providing accommodation entries. Thereafter, the AO also discussed about few share brokers [at para no. 7.8 at page no. 21 of the assessment order] wherein he noted that survey was conducted by the Directorate of Investigation, Kolkata on the following share brokers (i) Shri Anuj Agarwal/Director of Korp Securities Ltd (ii) Pravin Agarwal/Director of M/s. Gateway Financial Services Ltd and (iii) Subrata Haldar/Promoter ....
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.... been undisputed by AO. And it was pointed out by the Ld. AR before the Ld. CIT(A) that AO have not leveled any allegation/infirmity about the primary documents produced by the assessee to prove the purchase and sale of shares of M/s. Marigold. The Ld. CIT(A) agreed with the assessee that AO has not found any infirmity/deficiency in the primary documents produced by the assessee to prove her LTCG claim and the Ld. CIT(A) also found that AO has not been able to show that cash transaction was there in the assessee's claim. The Ld. CIT(A) found fault with the assessee for relying on the 3rd party statements without allowing assessee to cross-examine them. We concur with the finding of Ld. CIT(A) and also note that AO failed to show from the purported material which he relies upon in the assessment order (like investigation report of the Investigation Wing of Department, Financials, statements of stock-brokers/entry operator submission of assessee etc) that assessee was participant/recipient in the organized racket of generating bogus entries of LTCG and involved herself in the 'modus operandi' as discussed by him at para 6 of the assessment order. According to Ld. AR, unless the AO is....
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....nowhere alleges any wrongdoing of assessee or her brokers; and we have gone through the copy of the SEBI order dated 29th June 2022, wherein the SEBI conducted enquiry into the company M/s. Greencrest Financial Services Ltd & its director Shri Sunil Parekh and Shri Aditya Parakh and some allottees (total against 18 persons/entities refer page no. 45 of PB) wherein SEBI was concerned about two patches (Patch-1 from May 10th, 2013 to June 04, 2014 and Patch-II from June 05th, 2014 to Dec 04th, 2014). After investigation, the SEBI didn't impose any penalty against the company M/s. Greencrest, and its two directors and another allottee Shri Ravindra Kumar Grover; and SEBI imposed penalty for 14 persons/entities (refer Page no. 90 of PB). Thus, we find that there was no allegation/penalty imposed on assessee or her broker or even against the company M/s. Grencrest. Therefore, no adverse view can be drawn against the assessee on her claim of LTCG on sale of shares of M/s. Greencrest. Thus, we find that the general report/statements relied upon by AO in no way can be said to incriminate assessee being part of modus-operandi to do any illegal acts. As noted, the AO has been influenced by t....
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....n discussed in the ensuing paragraphs. 12. It is noted that the Ld. AR had rightly relied upon the judgment of the Hon'ble jurisdictional Bombay High Court in the case of Shyam R. Pawar (229 Taxman 256). In the decided case also, the assessee was purchasing and selling the shares through a broker in Mumbai, for purchase of shares of (i) M/s. Bolton Properties Ltd., (ii) M/s Prime Capital and (iii) M/s. Mantra; and he has transacted through the broker at Calcutta and two operators namely Mr. Sushil Purohit and Shri Jagdish Purohit, and one of them was the Director of M/s. Bolton Properties Ltd. who had purportedly admitted to have manipulated the share price of M/s. Bolton Properties Ltd. Mr. Jagdish also reportedly floated several investment companies which were aggressively used in the entire deal with the broker M/s. Prakash Nahata & Co. According to AO, the shares offloaded by the beneficiaries through M/s. Prakash Nahata & Co., were ultimately purchased by the investment companies controlled by Shri Purohit. The name of the assessee figured during the course of the investigation. The AO noted that these entities/ companies, whose shares were traded by the assessee, were not ....
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....tensively 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 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 a....
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.... shares as on 31-3-1999. After making the investments in the shares, the assessee had a surplus cash balance of Rs. 3,09,000 as on 1-4-1999. Thereafter, the assessee has further returned an agricultural income of Rs. 66,000 for the assessment year 2000-01. The amount invested in the purchase of shares in the year ending on 31-3-2000 was Rs. 2,57,020. Again the assessee had a cash balance thereof of Rs. 1,18,771. Therefore, it is, very clear that the investment made by the assessee in shares during the previous periods relevant to the assessment years 1999-2000 and 2000-01 was supported by cash generated out of agricultural income. The above agricultural income have been considered in the respective assessments. Therefore, the contention of the assessing authority that the assessee had no sufficient resourcefulness to make investments in the shares is unfounded. 10.3 Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the ass....
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.... have categorically admitted before the assessing authority that they had dealings with the assessee in respect of the share transactions. They have confirmed the transactions stated by the assessee that he had with them. These positive statements made before the assessing authority supported the case of the assessee. There is no force in the action of the assessing authority in relying on the negative statements of the other parties whose role during the relevant period was either irrelevant or insignificant. Therefore, in the facts and circumstances of the case, it is, our considered view that certain statements relied on by the assessing authority do not dilute the probative value of the statements given by other persons in favour of the assessee confirming the share transactions entered into by the assessee. 10.6 The above circumstances have made out a clear case in support of the book entries reflecting the purchase and sale of shares and ultimately supporting the money received on sale of shares and finally investing the same in the purchase of flat. The chain of transactions entered into by the assessee have been properly accounted, documented and supported by evide....
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.... law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee." 14. On further appeal, it is noted that the Hon'ble Bombay High Court in their order in ITA No. 456 of 2007 dated 07-09-2011 has affirmed the order of this Tribunal. 15. The Ld. AR of the appellant has rightly relied on another judgment of the Hon'ble Bombay High Court in the case of CIT Vs Jamna Devi Agarwal (328 ITR 656). In the decided case, also the Revenue had disputed the genuineness of the long-term capital gains derived by the assessee on sale of shares of listed companies for similar reasons as cited in the present case. On appeal, the Hon'ble High Court upheld the decision of this Tribunal deleting the additions by observing as under: "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....
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....unsel 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." 16. The Ld .AR also brought to our notice there cent judgment rendered by the Hon' ble jurisdictional Bombay High Court in the case of PCIT v .Ziauddin A Siddique (ITA No .2012 of 2017) dated 04.03.2022 which is found to be relevant in the facts involved in the present case .In the decided case, the issue before the Hon'ble High Court was whether this Tribunal was right in law in deleting the addition made u/ s68 of the ACT in relation to LTCG derived on sale of shares, ignoring the fact that the shares were purchased from off- market sources and that the sharp rise in prices were not supported by financials. Answering the question raised by the Revenue in the negative, the Hon'ble High Court held that there was a finding of fact that the purchase& sale of shares occured on the platform of stock, exchange upon payment of STT and were supported by documentary ecidences....
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....deleting the addition of Rs. 7593444/- by holding the transaction as genuine because transaction is through Stock Exchange and payment is by cheque, completely ignoring the fact that such masquerade is used methodically to provide accommodation entries in order to show the sham transaction as genuine? (III) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in deleting the addition of Rs. 151869/- being commission paid to acquire such accommodation entry? (IV) Whether on the facts and in the circumstances of the case, the Learned ITAT, Jaipur was justified in rejecting the Revenue's appeal without considering the case on merit where the additions were made by the AO on the basis of corroborative information received from Investigation Wing, Kolkata given that the case fails under exception as per para 10(e) of CBDT circular no. 03/2018 dated 20-08-2018. 18. The Hon'ble High Court is noted to have answered the above questions against the Revenue by following their earlier judgment rendered in the case ofCIT v. Smt. Pooja Agarwal, [2018] 99 taxmann.com 451, by observing as under :- "..Learned ITAT has sp....
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....essee. The relevant findings of the Hon'ble High Court are as follows :- "12...Lastly, reliance placed by the Revenue on Suman Poddar v .ITO (supra )and Sumati Dayal v .CIT (supra )is of no assistance .Upon examining the judgment of Suman Poddar (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 v .CIT (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". 21. We thus note that the later judgment of Hon'ble Delhi High Court in the case of Krishna Devi (supra) is relevant to the facts of the present case, whereas the decision of Suman Poddar (supra) cited by the Revenue, is found to be factually disting....
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....o justify its claim. Hence, both these decisions are found to be distinguishable. 25. Apart from the above, the Revenue has also relied upon several judgments rendered in the context of the genuineness of share subscription monies raised by closely held companies, which were held to be in the nature of unexplained cash credit u/s 68 of the Act by the judicial forums. Having perused those judgments, it is noted that, the question as to whether the assessee had satisfied the three ingredients set out in Section 68 of the Act is essentially a fact finding exercise. We note that the facts involved in each of them was qua share application monies whose facts & features were distinguishable to the issue involved in present case i.e. genuineness of capital gains derived on sale of shares. Since these judgments were noted to be not relevant to the present case, we do not deem it fit to discuss each of them separately. 26. We, instead, gainfully refer to the decisions cited by the Ld. AR, rendered by the coordinate Benches of this Tribunal wherein also, on similar facts and circumstances, following the above referred judgments of the jurisdictional High Court, this Tribunal deleted th....
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.... 18. ............. 19. On the above facts and circumstances, we find that the transaction of the assessee of deriving long term capital gains of Rs. 1, 93, 56, 813/- by selling shares of M/s Trinity Tradelink Ltd. was treated as bogus by the Revenue only on the basis of suspicion and probability and without finding any defect in the various documentary evidences filed by the assessee and further, the finding recorded by ld CIT (A) on page 26 of his order that the addition has been made on independent analysis of the documents, is contrary to material available on record. As on perusal of the order of assessment, we find that no independent inquiry was made with regards to alleged entry operator Sh. Vikrant Kayan. Whereas, the sole basis of making the impugned addition was statement of Sh. Vikrant Kayan, which too was recorded behind the back of assessee by DIT (Inv) Kolkata and the statement alone cannot be the conclusive evidence to nail the assessee and hence needs to be excluded for consideration as the said person has not been allowed cross examination by assessee, even though various requests were made by assessee. As such, the transaction of the assessee was duly....
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....th the bank statement of the assessee clearly established the fact that the assessee has made the payment of purchase consideration through banking channel on 31st October, 2012. Once the payment of consideration is not in dispute and shares were transferred in the name of the assessee as reflected in the Demat Account of the assessee, then the assessee has established the purchase of the shares and holding in the Demat Account since 31st October, 2012. The assessee is having Demat Account with IDBI Bank and on perusal of the Demat Account it revealed that the assessee has been a regular trader/investor in the shares of various companies including various public sector undertakings. Thus it is not an isolated transaction but it is one of the hundreds of transactions in the Demat Account of the assessee. Out of these 20,000 shares, the assessee has sold 15,500 shares after one year whereas the balance 4500 shares were sold prior to one year and offered short term capital gain to tax which has not been disputed by the AO. Thus out of a lot of 20,000 shares of M/s. Trinity Tradelink Ltd., the shares sold by the assessee prior to one year were not disputed by the AO as the short term c....
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....e, the transaction of alleged accommodation entry stated by Shri Vikrant Kayan prima facie relates to the company after the amalgamation and change of name which is a listed company whereas the assessee has purchased the shares of an unlisted company, namely M/s. Trinity Tradelink Ltd. Further, the question no. 8 was very specific and in answer to the said question, Shri Vikrant Kayan has stated as reproduced by the AO at page 8 of the assessment order as under :- " Q.8. Please tell the name of the parties to whom you have provided bogus billing ? Ans. Sir, I have provided accommodation entry in the form of bogus billing to many companies, some of them are Binani Cement Ltd., Binani Zinc Ltd., Merit Plaza Pvt. Ltd., Vansudhara Infra Developers Pvt. Ltd., Swis Mercantile Pvt. Ltd., Consumer Marketing India Pvt. Ltd., PAESS Industrial Engineers Ltd., Darashaw & Co. Pvt. Ltd. and Voltas Ltd." Thus in response to the question to tell the names of the parties to whom he provided bogus billing, he replied the names of various parties and, therefore, there is no allegation against the assessee or the assessee's partnership firm by Shri Vikrant Kayan. The AO ....
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....h of statement of third party i.e. Shri Vikrant Kayan cannot justify the impugned additions. More so, when specific request was made by the assessee for allowing cross examination was denied by the Assessing Officer. The first appellate authority also did not consider it fit to allow cross- examination. This is in gross violation of the principles of natural justice and against the ratio laid down by the Hon'ble Supreme Court in the case of Andaman Timber Vs. CIT Civil Appeal No. 4228 OF 2006... 14. Considering the facts of the case in totality, I do not find any merit in the impugned additions. The findings of the CIT(A) are accordingly set aside. The Assessing Officer is directed to allow the claim of exemption u/s 10(38) of the Act." 28. We also rely on the decision of the Hon'ble Allahabad High Court in the case of Pr.CIT Vs Renu Agarwal (153 taxmann.com 578) .In the decided case also the AO h addisallowed exemption claimed by assessee under section 10(38) and made additions to income of assessee on ground that assessee was involved in purchase & sale of shares which were being misused for providing bogus accommodation of LTCG. On appeal, the Hon'ble High Court ....