TaxTMI 
TaxTMI 
2023 (12) TMI 1425
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....st the principal of natural justice. 2. The LD CIT(A) erred in confirming Rs. 24,68,800/- as unexplained cash credit under section 68 of the Income Tax Act 1961 and thereby erred in confirming the addition to the total income of the assessee as against shown by the assessee as Long term Capital Gains. 3. The LD CIT(A) erred in confirming and treating Rs. 61,790/- as unexplained expenditure under section 69 of the Income Tax Act 1961 and thereby erred in confirming the addition of the the same to the total income of the assessee. 4. The Ld. CIT(A) erred in confirming the charging of interest under section 234A, 234B and 234C of the Income Tax Act 1961. 5. The Ld. CIT(A) erred in confirming the initiation of the penalty proceeding under section 271(1)(c) of the Income Tax Act 1961. The appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing. 3. The brief facts of the case are that, the assessee is engaged in the business. The assessee has filed the return of income for the A.Y 2014-15 on 30.09.2014 disclosing a total income of Rs. 8,17,860/-. Subsequently the cas....
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....ormation and observed that the transactions are not genuine and made addition of sale proceeds u/sec 68 of the Act of Rs. 24,68,800/- and estimated commission expenditure u/sec 69C of the Act @ 2.5% of the sale value which worked out to Rs. 61,790/- and finally assessed the total income of Rs. 33,73,450/- and passed the order u/s 143(3) of the Act dated 30.12.2016. 4. Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) has considered the grounds of appeal, submissions of the assessee, findings of the AO and in respect of addition u/s 68 & U/sec 69C of the Act, the CIT(A) has confirmed the action of the AO and dismissed the assessee's grounds of appeal and the CIT(A) has granted partial relief in other grounds of appeal and partly allowed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed appeal with the Hon'ble Tribunal. 5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the addition of the AO u/sec 68 and U/sec 69C of the Act overlooking the facts and submissions that the purchases and sale of shares are supported by evidences and are genuine and the assessee has subs....
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....ct notes, securitization tax at page 27 and 28 of the paper book. Similarly the demat account statement reflecting the sale transactions on 10.02.2014 placed at page 31 of the paper book, the Ld. AR also referred to the share purchase bills at page 23 of the paper book in F.Y 2011-12 to justify the genuineness of the purchases, sales and the long term capital gains as the assessee has sold the shares through recognized stock exchange where the STT has been paid in respect of listed shares and held for more 12 months and Ld.AR demonstrated the sales cum contract notes, computation of long term capital gains at page 22 of the paper book, contract notes and copy of the bank statement reflecting the payment for purchase of shares at page 24 and also the bank statement at page 29 to 30 reflecting the receipt of sale value. Further the Ld. AR relied on the global board report of the share transaction and also the facts supporting the sale of the shares. The Ld. AR submitted that the assessee is actively trading in shares and also referred to the details with respect to dematerialization of other shares. The Ld. AR submitted that the shares were purchased earlier through the broker and th....
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.... M/s. GIFL on 28.02.2012 which is evident from Certificate of Incorporation issued by Ministry of Corporate Affairs, which is available at page 15 of the paper book. The shares have been purchased from M/s. KKJ Stocks & Co. which is evident from perusal of the copy of the purchase bill. The copy of the share transfer deed and the transfer advice, share transfer forms along with share certificate is found placed at pages 10-11 of paper book and the transfer letter from the company duly transferring the shares in the name of the assessee has been filed. Further, we note that the shares have been sub-divided into 4,00,000 equity shares certificates of which has also been filed and is available at page 12 in the paper book. The assessee has purchased the shares from the off market and was in the physical form and later on it was dematerialised. The shares were credited into the assessee's demat account on 20.06.2013. Later on the shares were listed in the BSE and the assessee had sold the shares through M/s. J.M. Financial Services, Mumbai. Copy of Contract Note of sale is placed at pages 16 to 17 of the paper book. Copy of demat statement is available at pages 20 to 24 of the paper bo....
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....and Jain, legal heir of Santi Devi Bimalchand Jain, the Hon'ble High Court upheld the stand of the Revenue that the transaction in question is an adventure in nature of trade and the profit of the transactions is assessable under the head of 'Business Income'. In the case on hand, the Ld. Assessing Officer has not assessed this amount as 'Business Income'. In any event, I am bound to follow the judgment of the Jurisdictional High Court in this matter. I find that the assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made, by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court, (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. 7. The proposition of law laid down in....
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..... 22. There is also nothing on record which could suggest that the assessee gave his own cash and got cheque from the alleged brokers/buyers. The assessment is based upon some third parties statements recorded behind the back of the assessee and the assessee has not been allowed to cross examine those persons, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee in the light of the documents to substantiate the claim of LTCG, which has not been found fault with by the AO. 23. Let us look at certain judicial decisions on similar facts:- 24. The case of the assessee's is similar to the decision of Hon'ble Bombay High Court, Nagpur Bench in CIT vs. Smt. Jamnadevi Agrawal & Ors. dated 23rd September, 2010 reported in (2010) 328 ITR 656 wherein it was held that: "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 ITA Nos. 93 to 99/RPR/2014 & C.O. Nos. 12 to 18/RPR/2014 . A.Y. 2004-05 10 produced to establish the....
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....of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations, of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. Therefore, 'the prese/itdppeal does not raise any question of law, much less any substantial question of law." 25. The Hon'ble High Court of Punjab and Haryana in the case of Anupam Kapoor 299 ITR 0179 has held as under:- "The Tribunal on the basis of the material on record, held that purchase contract note, contract note for sates, distinctive numbers of shares purchased and sold, copy of share certificates and the quotation of shares on the date of purchase and sale were sufficient material to show that the transaction was not bogus....
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..... The Hon'ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:- "6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:- "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 t....
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....ibunal and allow this appeal." 16. On the strength of the aforementioned decision of the Hon'ble Supreme Court, the assessment order has to be quashed. 17. Even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the ....
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....paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The ld. AR has also submitted the IT return, ledger copy, letter to AO land PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase & sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities. 4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also con....
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....enny stocks. The Tribunal found that the AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. vi) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) - In this case the Hon'ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. vii) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] - In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon'ble Jurisdictional High Court, affirmed the decision of th....
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....(xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 29. The ld AR also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon'ble Supreme Court in the case of Krishnan and Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon'ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon'ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgm....
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....ts of the case of the assessee are identical with the facts in the cases wherein the co-ordinate bench of the Tribunal has deleted the addition and allowed the claim of LTCG on sale of shares of M/s KAFL. We, therefore, respectfully following the same, and set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and delete the consequential addition." So, respectfully following the decisions of Hon'ble Supreme Court, orders of Hon'ble jurisdictional High Court and the decisions of the coordinate bench of the Tribunal and especially taking into consideration the facts narrated in para 6 above, we hold that the lower authorities erred in holding the assessee's claim on LTCG from the sale of shares of M/s. GIFL as bogus. Therefore, we are inclined to allow the assessee's LTCG claim and, therefore, the appeal of assessee is allowed. 8. In the result, appeal of assessee is allowed. 8. The Coordinate Bench of this Honble Tribunal in the case of Sangeeta Newal Agarwal Vs. ITO in ITA No. 1806/Mum/2022 (A.Y. 2014-15) dated 28-11-2022 has dealt on the same scrip and granted relief observing at Page 4 Para 6 to 11 as under: ....
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....m 108)(Bom). The decision rendered by Hon'ble Bombay High Court in the above said case is extracted below:- "3. Mr. Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr. Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted. 4. Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the e....
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....Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr. Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation 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 befo....
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....res were purchased on 13.09.2011 through stock-trade KKJ Stocks & Company having office in Chennai. The name of this broker does not find mention in paragraph 9.11 of the assessment order wherein in the name of stock brokers, who have admitted to providing accommodation entry of bogus long term capital gains have been mentioned. It is also not the case of the Revenue that the Appellant was a part of syndicate of people that acted as accommodation entry providers. On perusal of the extract of the statement of the Appellant recorded during the assessment proceedings (as reproduced in paragraph 13 of the assessment order) shows that the Appellant had stated that have brother in-law was taking care upon trading/investment in shares and that her brother-in-law was in turn, advice for investment consultant. It is pertinent to note that the Assessing Officer has not shown that brother-in-law or investment consultant were part of syndicate. On perusal of paragraph 19.9 of the assessment order, it can be seen that the Assessing Officer relied upon the price fluctuations between 18.11.2011 to 08.03.2013 to conclude that there was ragging of prices during the aforesaid period, whereas in the ....