TaxTMI 
TaxTMI 
2025 (5) TMI 1295
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....er the Learned CITA was justified in deleting the addition made on account of denial of LTCG exemption under section 10(38) of the Act in the facts and circumstances of the instant case. 4. We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2014-15 was filed by the assessee on 30-9-2014 declaring total income of Rs 5,37,900/-. The assessee is an individual and running a proprietary concern namely M/s Aggarwal Marble House engaged in the business of trading of marbles. During the year under consideration, the assessee had claimed exemption under section 10(38) of the Act on sale of shares of M/s Unno Industries Ltd. The scrip of M/s Unno Industries Ltd was considered as a penny stock by the revenue. The workings for long term capital gains of Rs 63,06,402/- claimed by the assessee as exempt under section 10(38) of the Act are as under:- S no. No of shares sale of shares Cost of shares LTCG 1. Date Sale price Date Cost price 1. 2,33,000 04.03.14 47,68,905 15.02.13 2,33,000 45,35,905 2. 1,00,000 06.03.14 18,70,497 15.02.1....
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....no Industries Ltd, which was not complied with by the said company. The assessee was confronted by the Learned AO in this regard. The assessee stated that he does not know any of the directors and hence he could not ensure compliance of notice under section 133(6) of the Act by the company or produce the directors for examination. The Learned AO based on this, concluded that when the assessee does not know any of the directors of Unno Industries Ltd, then how in the year 2013 he could have been allotted shares on preferential basis. Later, summons under section 131 of the Act was issued to the assessee by the Learned AO. Statement was recorded from the assessee on oath. Assessee submitted that he is a regular investor in shares and the investment in Unno Industries Ltd was made based on net worth and profitability of the said company, but the Learned AO from the financials of Unno Industries concluded that there is no net worth or profitability with Unno Industries Ltd. The statements recorded from middlemen were also provided to the assessee by the Learned AO. Further, the Learned AO observed that the shares of Unno Industries Ltd was suspended from trading vide SEBI adjudication ....
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....section 131 of the Act for which no response was made by the assessee before the Learned AO for assessment year 2015-16. He submitted that other than this, all other facts are identical with that of assessment year 2014-15. 9. It is not in dispute that the sale consideration received by the assessee on sale of 3,33,000 shares of Unno Industries Limited was Rs. 66,39,402/-. The long-term capital gains (LTCG) derived by the assessee on such sale was Rs. 63,06,402/-. We find that the Learned AO had made an addition under Section 68 of the Act by denying the claim of exemption under Section 10(38) of the Act only for the long-term capital gains portion of Rs. 63,06,402/-. This goes to prove that the Learned AO was satisfied about the three ingredients of Section 68 of the Act viz. namely identity of the party who has given the money, genuineness of the transaction and credit worthiness of the party who has given the money with regard to the differential portion of Rs. 3,33,000/- being the cost of acquisition of 3,33,000 shares of Re. 1 each. If the genuineness of the transaction is to be doubted, the Learned AO ought to have doubted the entire sale consideration receipt of Rs. 66,39....
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....h in off market on preferential allotment basis). The share certificates to that extent were duly issued to the assessee. The shares were duly dematted by the assessee within time with the authorized depository participant . Then the shares were held by the assessee for more than one year. The part of the shares were sold by the assessee in the open market through a registered share broker in the recognized stock exchange after duly suffering STT. The sale proceeds of the shares were indeed received by the assessee from the stock exchange through the registered share broker in regular banking channels. The assessee once he sells the shares in the open market is not even aware to whom he had sold. In this background, the documents submitted by the assessee cannot be disbelieved merely because the scrip dealt by the assessee happens to be a tainted scrip according to Learned AO or according to Kolkata investigation wing or according to SEBI order. Assessee has invested in shares of various companies and Unno Industries is only one such company. This is evident from the Balance Sheet of the assessee enclosed in Pages 52 and 53 of the Paper Book. Unless there is a direct evidence again....
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....2016 had suspended the trading in the scrip of Unno Industries Limited. The assessee's transaction took place in the month of March-2014 which was much before the suspension of the trading of scrip of Unno Industries Limited. Hence, even the action of suspension of scrip of Unno Industries Limited has got no bearing on the assessee herein either for sale made in Assessment Year 2014-15 or in Assessment Year 2015-16. 12. We find that a statement on oath was recorded from the assessee on 28-11-2016 wherein a specific query was put by the learned AO to the assessee as to how he came to know about the shares of Unno Industries Limited. In response, the assessee submitted that depending upon the net worth and the profitability of Unno Industries Limited and the merger policy thereon, he was made known about the shares of that company during the professional discussions. Further, he had also stated that he had during discussions with the financial advisor, came to know about the preferential allotment of shares being made by Unno Industries Limited. Specifically, vide Question No. 13, a query was raised to the assessee stating that investigation wing had unearthed the price manipulati....
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....after. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO 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 preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department....
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....d the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities 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 the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supr....