TaxTMI 
TaxTMI 
2024 (1) TMI 1329
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....0-12 to 30-09-15 which clearly prove that all the transactions were sham transactions and used as a colourable device and generation of documentary evidences were part of the Hawala deal for converting unaccounted money into tax exempt income. 2. Deleting both additions without appreciating the fact that the assessee made bogus claim of LTCG by availing accommodation entries in listed companies and also failed to adduce cogent evidence to substantiate the unexplained spurt in the value of shares of penny stock companies. 3. The appellant craves to add, amend, alter delete or modify the above ground of appeal before or at the time of hearing." 2. Briefly facts as per record are that the appellant had claimed long term capital gains on sale of shares of Sunrise Asian Limited during the year under consideration. The AO noticed that the assessee has purchased 24000 Shares of Conart Traders Limited through M/s P. Saji Textiles Limited that later on amalgamated with Sunrise Asian Limited and consequently, against the shares of Conart Traders Limited, new shares were allotted in multiple of the original shares. The assessee filed details of the demat account, brokers ....
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....t agency giving the finding that the prices of shares on sale of which ite appellant has declared Long Term Capital Gain were rigged or manipulated during the relevant period for the purpose of obtaining bogus Long Term Capital Gain. (v) Any other information received by the AO from any government agency of any other organization person in response to enquiries conducted u/s 131,133(6) or otherwise, which shows that the appellant had received accommodation entry in the form of Long Term Capital Gain by making cash payment to the person or his agent/ associate involved in providing such accommodation entry. The above information copies of statement/ documents/ loose paper may be submitted to this office latest by 30.08.2017 4.4 As the AO did not furnish the requisitioned information/ copy of impounded seized documents or loose papers as mentioned in the letter dated 02.08.2017, therefore a reminder dated 05.09.2017 was issued to the AO, stating as under: -Vide this officer letter dated 02.08.2017, the information copy of impounded seized documents! loose papers as mentioned in the letter were requisitioned. The information/ copy of impounded / sei....
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....ort on "Project Bogus LTCG STCL through BSE Listed Penny Stock" prepared by Shri Dhruva Purari Singh. (DDIT Inv.). requested to go through this office letter No. Unit-2(3). Kolkata. You are CIT(A)/AJM/2017-18/286:1 dated 02.08.2017 carefully and furnish the information! evidence/ documents specifically requisitioned by this office letter dated 02.08.2017. You are advised to give your comment reply in respect of each of the five points on which the information document has been requisitioned vide letter dated 02.08.2017 of this office by 23.10.2017." 4.7 Therefore, letter dated 08.02.2018 were issued requesting as under: "In your report dated 21.09.201 you are silent in respect of 5 points on which the information documents was requisitioned vide letter dared 02.08.2017 of this office. Once again you are requested to send your comment reply in respect of each of the five points on which the information documents was requisitioned vide letter dated 02.08.2017 by 26.02.2018. The same letter was sent to the AO on 05.03.2018 calling for the requisitioned information by 12.03.2018. The AO submitted the report dated 16.07.2018 as under:- "Kindl....
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....this regard, it is also stated that a CD containing investigation report of DIT (Inv.) DY Director of Income-tax (Inv.). Unit-23). Kolkata has already been submitted to your office vide this office letter no. 745 dated 21.09.2017 which may kindly be perused" 4.9 Written submissions filed by the appellant were also forwarded to the AO on 06.06.2017 calling for the remand report on 16.06.2017. He has sent the Remand Report dated 15.07.2017 on the written submissions of the appellant forwarded to him, as under:- "Kindly refer to your office letter No. CIT(A)/AJM/2017-18/1369 dated 06.06.2017. In this connection, an opportunity of being heard was provided to the assesses. In response to this, A.R. of the assesses replied that he had already submitted all the documents in appellate proceedings. The remand report/comments on each of the issue are submitted as under Facts of the case are that the assessment in this case was completed /s 143 (3) of the IT. Act on 27.12.2016 on total income of Rs. 1.29.12.030/- In the assessment. assesses claim of LTCG of Rs. 1.13.66.376- was disallowed and added to the total income u/s 68 of the I.T. Act, 1961 as unexplained cash....
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....fter through investigation has certified that such transactions are rigged and are carried out to convert Black Money into White. Further, it is also submitted that most of the facts and evidences filed by the assessee in his submission during the appellate proceedings had already been filed during the course of assessment proceedings, which were discussed in detail in the assessment order itself. In respect of providing an opportunity to the assesses to cross examine Sire Ang Agarwal, reliance is placed on the decision of Hon'ble Rajasthan High Court in the case of Rameshwar Lal Mali Vs CIT (256 ITR 536), wherein it has been held that "there is no provision for permitting a crass examination of the person, whose statement is recorded during the survey". Hence, assesses request for cross examination is not essential and valid. As far as statement of Shri Anuj Agarwal is concerned, the same was provided to the assessee during the assessment proceedings. In view of the aforesaid, additions made in the assessments may kindle be upheld. The remand report along with case records is submitted for your kind perusal and consideration. "4.15. After go....
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....eriod 16-10-12 to 30-09-15 which clearly prove that all the transactions were sham transactions and used as a colourable device and generation of documentary evidences were part of the Hawala deal for converting unaccounted money into tax exempt income. He contended that the decision of the Ld. CIT(A) in deleting both additions without appreciating the fact that the assessee made bogus claim of LTCG by availing accommodation entries in listed companies and failed to adduce cogent evidence to substantiate the unexplained spurt in the value of shares of penny stock companies. He prayed that the assessment order may be restored and the order of ld. CIT(A) be reversed. 5. The defendant counsel for the appellant vehemently relied on the impugned order contending that the CIT(A) has deleted the addition considering various judicial decision and various documentary evidence submitted before him in the form Balance Sheet, Share certificates, Bank Statements, demat account, broker notes, master data of Sunrise Asian Limited, etc. The Ld. AR for the appellant submitted documents related to the purchase of shares (APB, pages 20 to 23), demat account statement (APB, pages 24 to 26), bank st....
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.... bank account attached with the Demat account. The detail of the persons purchasing the shares is not provided on the portal of SEBI and all the transactions of purchase and sale took place on the portal through registered brokers under the control of SEBI. M/s SAL has not been striked off as a shell company. Trading of shares of M/s SAL was permitted by SEBI. Prime facie, all the conditions provided u/s 10(38) of the Act seems to have been fulfilled by the assessee. 17. As regards the second issue raised is that assessee was not provided opportunity of cross examination, we observe that Ld. A.O has referred to some investigation carried out by the Department in the case of some brokers and other assessee(s) located at Kolkata and other places and there is a reference of the company M/s SAL. However, it is not disputed that name of the assessee is not appearing in such report nor any evidence was found by the Ld. A.O which could indicate that assessee was also a part or connected to the alleged racket of providing accommodation entry of bogus LTCG nor any proof of any agreement between the assessee and other persons mentioned in the report has been found. So the basis of a....
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....Private Limited in online platform of the recognised stock exchange during the month of March, 2014. The selling price was in the range of Rs. 489/- to Rs. 491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was received through banking channels. The transactions are duly through clearing mechanism of the stock exchange and sale consideration evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume at and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs. 360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the....
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....no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. 8. The allegations of Ld.AO that the assessee was part of the group which indulged in rigging or manipulation of prices of shares in connivance with Shri Vipul Bhat is not backed by any independent material. Firstly, there is nothing on record which establishes the fact that the assessee was acquainted with Shri Vipul Bhat or any of his entities and secondly, the onus casted upon assessee to prove the genuineness of The transactions was already discharged by the assessee. Shri Vipul Bhat, in his statement, stated that one Shri Sandeep Maroo acted as intermediary who introduced Vardhan family to him. However, no further investigations have been carried out to establish this vital link between the assessee and Shri Vipul Bhat. We do not find any independent investigations by Ld. AO To bring on record any tangible material to corroborate the same. There are no evident or even allegation of any cash exchange be....
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....ces are over looked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares And ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. We find that this decision was firstly been approved by Hon'ble Bombay High Court vide ITANo. 456 of 2007 on 07/09/2011 and there after, special leave petition against the said decision has been dismissed by Hon'ble Supreme Court vide SLP No. 20146 of 2012 dated 27/01/2014 which is reported as 88CCH0027SCC. The SMC Bench of Tribunal in Anraj Hiralal Shah (HUF) V/s ITO (ITANo. 4514/Mum/2018 dated 16/07/2019) held that in the absence of any evidence to implicate the assessee or to prove that the transactions were bogus, the Long Term Capital Gains declared by the assessee could not be doubted with. This case was dealing with gains earned by the assessee on sale of same scrapie. M/s Sunrise Asian Ltd. 13. Therefore, considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld. CI....
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....on, involvement or collusion with So called accommodation entry providers. Further in the afore said case, the issue as to whether the legal evidence produced by the assessee has to guide Our decision in the matter or the general observations based on statements, probabilities,' human behaviour and discovery of the modus operandi adopted in earning alleged bog us LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim is genuine or not has been discussed at length. and referring to legal proposition laid down by the Hon'ble Supreme Court that the burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidence held that the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee unless specific evidence is brought on record to Controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected. We are in complete agreement with the said view and in the instant case, we find that evidence produced by the assessee in support of his claim of purc....
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....d as exempt u/s 10(38) of the Act. Accordingly, in the facts and circumstances of the case, we set-aside the order of the Id. CIT(Appeals) and the claim of the assessee u/s 10(38) is allowed. The matter is thus decided in favour of the assessee and against the Revenue. In the result, the ground of appeal so taken by the assessee is allowed. 26. In the result, the appeal of the assessee is allowed." 6. We have heard the rival contentions, perused the material on record, impugned order and judicial precedents cited before us. Admittedly, the appellant assessee has purchased 24000 Shares of Conart Traders Limited thorough M/s P. Saji Textiles Limited that later on amalgamated with Sunrise Asian Limited and consequently, against the shares of Conart Traders Limited, new shares were allotted in multiple of the original shares. The assessee filed details of the demat account, brokers note and bank details to justify genuineness of the purchase and sale of the shares. The Ld. CIT(A) has observed that the appellant has furnished each and every document required to prove the genuineness of both purchase and sales of the shares of the Sunrise Asian Ltd., whereas the AO has not br....
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....ng of the shares for more than one year and the sale of shares through are glistered share broker in are cognized Stock Exchange and payment of Securities Transaction Tax there on, all were supported by documentary evidences which were placed before the lower authorities. The Revenue could not point out any specific defect with regards to the documents so submitted by assessee. In our considered view, effect of a transaction which is supported by documentary evidences cannot be brushed aside on suspicion or probabilities without pointing out any defect there in. 13. In the instant case, the Assessing Officer himself observed that the movement in price of shares of M/s Esteem Bio and M/s Turbo tech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we a....
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....a is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to pre suppose as to what could be the subject matter of the cross examination and make there marks as mentioned above. We may also point out that on an earlier occasion when the matter came befor....
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....id company did not move along with the sensex; and the financials of the company did not show any reason for the extra ordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the Assessing Officer that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets outthemodusoperandiadoptedinthebusinessofprovidingentriesofbogusLTCG. 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 ....
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....bilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon there port of the Investigation Wing. 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, interalia, 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 c....