TaxTMI 
TaxTMI 
2024 (10) TMI 581
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....ereinafter "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 trade of this scrip from page no. 12 to 14 of the assessment order and noted that betw....
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....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 had filed her return of income for AY. 2015-16 on 30.09.2015 declaring total income at Rs....
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....irming 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 3 Copy of Account Ledger of Harjivandas Nemidas Securities Pvt. Ltd. In the books of Mrs Nisha S. Pokle 64-65 4 Copy of Depository participant (IL&FS) Contract notes for sale ....
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.... 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 of BSAS Securities Pvt. Ltd and (iv) Soumen Sen/(D.B & Co.) who all accepted their role in the entire scheme of providing accommodation entry in the form of bogus LTCG. Thereafter, he concluded that the purchase and....
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....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 able to point out from the investigation report/statement of stock brokers/entry operators and spell out the role of assessee/broker as a wrong-doer or participant in the racket (as stated in the report of investigat....
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.... 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 the investigation report submitted by the Investigation Wing of Department functioning at Kolkata. It is true that some unscrupulous entry operators had devised methods/modus- operandi to beneficiaries to facilitate laun....
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.... 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 having sufficient business activities justifying the increase in their shares prices. Therefore, the AO concluded that certain operators and brokers devised a scheme to accommodate the unaccounted monies of the assessee in guise of ....
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....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.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not....
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.... 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 assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions. 10.4 When the trans....
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.... 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 evidences. 10.7 Therefore, we find that the explanations of the assessee seems to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous....
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....se 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 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 transacti....
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....ce 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 and therefore there was no perversity in the order of this Tribunal .The Court further noted that there was no allegation against the assessee that he had participated in price rigging in the market and therefore dismissed the appeal of the Revenue. The relevant findings of the Hon'ble High Court which is binding upon us, are as follows:- "2. We have con....
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....ified 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 specifically held that the assessee has produced all the relevant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court in CIT v. Smt. Pooja ....
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....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 distinguishable in light of the facts involved in the present case, as discussed above. 22. In the case of Sanjay Bimalchand Jain Vs PCIT (supra) cited by the Revenue, the assessee had made payments in cash for acquisition of shares and therefore genuineness of purchase was held to be in doubt. It was also found that the address of the listed shares purchased and the address of the stock broker was the same which was found to be peculiar and....
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....er 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 the addition/s made by the AO u/s 68 of the Act in relation to the long- term capital gains derived on these listed shares of TTL. The Ld. AR had brought to our notice that, the coordinate Bench at Delhi in the case of Seema Tayal Vs. ITO (ITA. No.1132/Del/2018) dated 28.06.2019 was pleased to delete similar addition on account of alleged bogus LTCG made by the AO in relation to sale of shares of TTL by the assessee by holding as under: - "17. T....
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....r 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 supported by relevant documentary evidences without there being any rebuttal by lower authorities; the addition made by the Assessing Officer of Rs. 1,93,56,813/- by treating the LTCG as bogus is unsustainable. In view of our above finding, we, therefore, delete the addition of Rs. 1,93, 56,813/-. 20. As we find the transaction of long term capital gains of Rs. 1,93,56,813/- derived by the assessee as genuine and as such, further addition of Rs. 3,87,136/- made b....
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....t 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 capital gain was offered to tax by the assessee. The AO has disputed the transaction of purchase and sale only to the extent of the shares which were sold after one year and thereby the assessee claimed long term capital gain as exempt under section 10(38) of the IT Act. We further note that the AO has given the details of the prevailing price of shares of M/s. Trinity Tradelink Ltd. at Stock Exchange in the years 2012, 2013 and 2014. However, it is pertinent to note that the assessee purc....
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.... 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 based on the report of investigation and the statement has treated the transaction as bogus whereas the assessee produced all the relevant direct evidences to establish the purchase of shares by paying the purchase consideration through banking channel. The evidence produced by the assessee is independently verifiable as the bank account wherein the payment is reflected cannot be manipulated by the assessee. Further, the shares were dematerialized and holding of the shares in the Demat Account is also indepen....
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....se 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 noted that the lower appellate authorities had extensively examined the facts of the case and taken note of the material fact that there was no adverse comment in form of any specific statement by Principal Officer of stock exchange or by company whose shares were involved in these transactions against the assessee and that the AO had only cited statements of unrelated persons on basis of unfounded presumptions. On these given facts, the Hon'ble High Court upheld the order of lower authorities deleting the addition made in relation to LTCG deriv....