TaxTMI 
TaxTMI 
2025 (4) TMI 861
X X X X Extracts X X X X
X X X X Extracts X X X X
....dition is beyond the scope of provision. 3. Because ld. CIT (A) has erred in law in sustaining the rejection of claim u/s 10(38) on sale of listed equity shares, sale/purchase of which is duly supported with all the possible evidences without rejecting/finding any defect in evidences. 4. Because ld. CIT (A) further failed to appreciate that, addition is based on surmise and conjectures being : a) Reliance on behind the back statement for addition and reproduced in order is wrong in as much as none of party charged the transaction under question or assessee etc. b) No opportunity to cross the statements reproduced is ever provided. c) There is no evidence against the assessee except ref. to general modus operandi or ref. of unknown statement/cd. d) Because ld. AO erred in making ad hoc addition of Rs. 21,35,085/- being alleged payment of commission only on the imaginative basis without any material." 2. Brief facts of the case are, assessee has filed return of income showing income of Rs. 10,77,180/- on 26.08.2015. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 (for short 'the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... further submitted that all these cases, Savita Jain and Vipin Jain as well as the present assessee, involved the same script of Alps Motor Financial Ltd. and the ITAT, in its wisdom, ruled in favour of the assessee's, holding that the transactions were genuine. Ld. AR of the assessee submitted written submissions which are reproduced below for the sake of clarity :- "Date Chart Showing Timeline of Events Sr. No. Date Event 1 1/11/2012 Purchase of 1,00,500 equity shares of Alps Motor Finance Limited at Rs. 2 each from Sh. Ashvin Verma (Total: Rs. 2,01,500, Payment Mode: Cash) 2 17/01/2014 Shares were dematerialized. 3 20/06/2014 Sale of 10,000 shares at Rs. 423 each through Share Broker i.e. Century Finvest Pvt. Ltd. (Payment Mode: Banking Channels) (Refer Page 30 of PB) 4 24/06/2014 - 17/07/2014 Sale of remaining shares through Share Broker i.e. Century Finvest Pvt. Ltd. (Payment Mode: Banking Channels) (Refer Page 30 of PB) The documents furnished before the Assessing Officer are: 1. Share Purchase Documentation: Provided a photocopy of the physical share certificate, bill, and payment receipt for the purchas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TAT, in its wisdom, ruled in favour of the assessee's, holding that the transactions were genuine. Further buttressing our case is the fact that the Revenue has refrained from challenging these decisions by not filing any appeal against them. This inaction can be reasonably interpreted as an implicit acceptance of the ITAT's judgments by the Revenue, thereby substantiating the genuineness of the transactions involving the said shares of Alps Motors Finance Ltd. As such, it would be reasonable to assert that the Revenue's non-challenge sets a form of precedent that supports our contention in the matter at hand. Inappropriate Reliance on Unconfronted Statements and Failure to Allow Cross-Examination The Assessing Officer has leaned on certain key statements, including those from two brokers and Bikash Surekha, to build a case against the assessee. It is noteworthy that these statements were never presented to the assessee for the purpose of cross-examination, despite a formal request for such an examination being submitted by the assessee. The copy of this letter has been duly submitted before the court and can be found at page 5 of PB in the present su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y scrutiny substantiates the lawful and transparent nature of the transactions undertaken by the assessee. Moreover, the fact that trading of shares of Alps Motors Finance Ltd. has not been suspended by SEBI strongly indicates their legitimacy and compliance with relevant securities laws. Furthermore, it is important to highlight that the shares of Alps Motors Finance Ltd. are currently marketable and actively traded on the stock exchange as of today's date. This continued marketability serves as additional compelling evidence supporting the genuineness of the transactions in question. No inquiry or action by Income Tax Department on Assessee or broker or Alps Motors Finance Limited Additionally, it is pertinent to note that no other authoritative bodies, including but not limited to the Directorate of Revenue Intelligence (DRI) and the Income Tax Department, have initiated any inquiry or investigation against the broker, the assessee, or Alps Motors Finance Ltd. This collective non-action across multiple regulatory agencies not only lends credence to the integrity of the transactions but also severely undermines any broad allegations of financial imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on. Insufficiency of Nationwide Investigation for Specific Case While the Assessing Officer relied heavily on a nationwide investigation concerning bogus Long-Term Capital Gains, it is essential to state that neither the assessee nor Alps Motors Finance Ltd. were implicated in this investigation. This disjuncture further exacerbates the shakiness of the Officer's case against the assessee. The Folly of Imputing Guilt by Association Invoking a generalized modus operandi concerning bogus Long- Term Capital Gains does not suffice as a valid ground for undermining the assessee's legitimate, document-supported transactions. Without direct evidence or inquiry implicating the assessee, the application of Section 68, and consequently Section 69C, is unjustifiable. In summary, the absence of any specific material evidence or investigative findings that could reasonably implicate the assessee renders the additional imposition under Sections 68 and 69C as fundamentally flawed. In light of these considerations, it is imperative that the Assessing Officer's determinations be revoked, thereby validating the assessee's claim for an exemption un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore, the Assessing Officer's disallowance under Sections 68 and 69C of the Income Tax Act lacks merit and should be duly revoked. Subsequently, the assessee's claim for exemption under Section 10 on the grounds of Long-Term Capital Gain deserves to be granted. This line of reasoning augments and solidifies the earlier arguments presented, laying additional weight on the necessity for setting aside the unjust additions made by the Assessing Officer under Sections 68 and 69C." 6. On the other hand, ld. DR of the Revenue relied upon the orders of the authorities below. 7. Considered the rival submissions and material placed on record. We observed that the issue involved in the present case is exactly similar to the case of Vipin Jain (supra), individual. We have gone through the order of the ITAT in Vipin Jain, individual's case (supra) wherein the ITAT has decided the appeal in favour of the assessee wherein the scrip of Alps Motor Finance Ltd. was involved, which is also involved in the present case, and the relevant findings of ITAT are as under :- "8. We have heard the rival submissions and also perused the relevant findings given in the impugned orders a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(a SEBI registered Broker) for sale of shares along with duly confirmed copy of account and showing the STT paid on the sale of shares. D. Bank Statement of the assessee indicating the payment received from broker against sale of shares. 10. Further Let. AR submitted that one very important fact in the present case is that SEBI which is a regulatory authority for the smooth functioning and monitoring of the stock exchange has not suspended the scrip ALPS Motors Finance Ltd. at any point of time and the shares are still being transacted at the Market price ruling on the date of transaction on a screen based trading, therefore, the bald allegation against the assessee is wholly without substance particularly when no contrary evidence has been brought on record and the allegation is simply based upon the general modus operandi found by the Directorate of Investigation, Kolkata in various other penny stock shares. 11. In relation to reliance placed on the 2 broker's statements recorded by the, he submitted that firstly, none of these statements were confronted to the assessee during the course of assessment proceedings and even in the show cause notice, and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from SEBI/BSE where genuineness of the scrip has been doubted. When no such inquiry or material has been found or gathered that assessee is beneficiary or was involved in any such scam of accommodation entry, then it is very difficult to discard the assessee's explanation and documents. 13. In addition, in the other statement reproduced i.e. of Anil Khemka, there is no reference to the appellant assessee's transaction or scrip namely Alps Motors Finance Limited. 14. Ld. AR further submitted that, here, in this case, purchase of shares was made in the Financial Year 2012-13 relevant to assessment year 2013-14 and is evidenced by the cash abstract and other related documents. Thus, possession of the share is not in doubt at all, because same is also reflected in DEMAT account maintained with DP and Vijaya Bank. Not only that, the sale of shares is also evidenced from transaction undertaken through SEBI registered Broker and after the sale of shares, the net receipts have been credited to the assessee's bank account. Hence, the nature of the transactions clearly purchase and sale of shares and the source of the credit, from the material facts on record a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re purchased by the assessee in the Assessment Year 2012-13 for sum of Rs. 1,25,000/- which has been sold in the impugned assessment order for Rs. 3,20,57,034/- and Long Term Capital Gain of Rs. 3,18,92,584/- has been declared which has been disallowed by the Assessing Officer and has been taxed u/s. 68. This inter alia shows that the purchases made in the earlier years regarding shares have not been disputed at all, only Net LTCG has been added. Major part of the discussion in the assessment order is show how the Director of Instigation Calcutta carried out countrywide investigation wherein the modus operandi were providing Long Term Capital Gain / Short Term Capital Loss were unearthed and Assessing Officer has given sample of cash trail and how the mechanism works which has been illustrated by him in detail. He has given a master table and cash trail showing name of 18 broker companies/persons and concern jama kharchi companies and also name of various persons who were involved as share broker, promoter, beneficiaries or otherwise who were indulged in malpractices and whose case search and survey were carried out and submissions were recorded. From the bare perusal of these exha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owhere it has surfaced that scrip was used for providing accommodation entry. We are unable to appreciate as how these statements have any relevance on transaction or there is something to implicate assessee that he was involved in accommodation entry fur taking bogus Long Term Capital Gain. 19. Another important factor here in this case is that, the ld. counsel has placed various orders of SEBI which is a regulatory authority for smooth functioning or monitoring of stock exchange to point out that at no point of time, the trading of Alps Motor Finance Ltd. was suspended or there was any finding that the prices of the Alps Motor Finance Ltd. were rigged or there was any kind of manipulation. In the present case, the shares have been transacted at a market price quoted on the date of transaction in the Stock exchange and on screen based trading, and therefore, to infer that the price have been rigged in violation of SEBI rules or guidelines may not be correct. There has to be some iota of evidence or incriminating material that, either Alps Motors Finance Ltd. was suspended or trading of its shares were banned by the SEBI for manipulating or rigging of the share price in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erial on record to implicate the assessee, cannot be the basis for disbelieving the transaction. There has to at least some kind of prima facie inquiry by the Assessing Officer or some information or material has been gathered or found in some inquiry or investigation to indicate that transaction undertaken by the assessee is sham or is a colourable device, If the shares are recorded in the books and are appearing in physical form and then have been dematerialized and purchase of such shares have not been doubted, then sale of the same shares in Stock Exchange at a quoted price cannot be held to be unexplained cash credit within the meaning of Section 68, Once a Capital asset has been acquired, reflected in the accounts of the assessee and has been sold, for which necessary evidences have been filed and there is no adverse material or information or inquiry to prove that nature and source of credit as explained by the assessee is false, no adverse inference cannot be drawn and the evidences and explanation given by the assessee cannot be discredited. We again reiterate that though the accommodation entry of bogus Long Term Capital Gain is a menace which has been unearthed through i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r records that there was no material which could signify that either the Company was suspended, or its shares were barred from trading or the price of the scrip of company was manipulated for the purpose of providing accommodation entry. It has been held by the ITAT that purchases made in the earlier years regarding the shares also remained undisputed and the exhaustive list containing the concerned individuals or companies indulged in malpractices pertaining to LTCG, which has been heavily relied upon by the Revenue, does not mention the given transaction of the respondent-assessee. Notably, it is seen from the impugned order that the AO has failed to corroborate its conclusions on the basis of any cogent material available on record before forming an opinion that the sale transaction was sham and a pre-planned arrangement to claim exemption under the guise of LTCG. 15. An upshot of the above findings of the ITAT, coupled with the fact that no irregularity was highlighted by the Securities and Exchange Board of India pertaining to the transaction of the scrips of the Company, would lead us to the conclusion that there is nothing adverse against the respondent-assessee whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments....