TaxTMI 
TaxTMI 
2024 (2) TMI 1555
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the AO received information from the Investigation wing of Kolkatta that certain brokers are involved in manipulating the prices of small companies (called "penny stock") in order to generate bogus capital gains/losses. It was also informed that the assessee has sold one of the penny stocks named "Sunrise Asian Ltd" for a consideration of Rs. 1,96,77,276/- and declared Long term capital gain of Rs. 1,88,08,631/-, which was claimed as exempt u/s 10(38) of the Act. Based on the information so given by the Investigation wing, the AO took the view that the long term capital gains declared by the assessee is not genuine one and accordingly reopened the assessment by issuing notice u/s 148 of the Act. 3. It was noticed that the assessee had purchased 40000 shares of Sunrise Asian Ltd for a consideration of Rs. 8.00 lakhs on 28.11.2011. She sold all the shares from 03-12-2013 to 06-01-2014 for an aggregate value of Rs. 1,96,08,631/-. Since the shares were held for more than one year, the assessee claimed the capital gain of Rs. 1,88,08,631/- as exempt u/s 10(38) of the Act. The assessing officer extensively relied upon the report given by the investigation wing. He observed that the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the Tribunal in the case of Golden Tobacco Ltd (65 ITD 380), wherein it was observed that the right of cross examination is not an invariable attribute of the requirement of dictum. The AO further held that the long term capital gain generated by the assessee is beyond the preponderance of human probabilities and a colourable device adopted by the assessee to show artificial income. In this regard, the AO placed his reliance on the decisions rendered by Hon'ble Supreme Court in the cases of CIT vs. Durga Prasad More (82 ITR 540), Sumati Dayal (214 ITR 801) and McDowell and Co Ltd vs. CTO (154 ITR 148). 6. Accordingly, the AO rejected the claim for exemption u/s 10(38) of the Act and assessed the entire sale consideration of Rs. 1,96,08,631/- as unexplained cash credit u/s 68 of the Act. The AO also took the view that the assessee should have incurred expenses in procuring the bogus long term capital gains. The AO estimated the same at 2% of the sale consideration, which worked to Rs. 3,92,172/-. Accordingly, the AO assessed the above said amount as unexplained commission expenditure u/s 69C of the Act. 7. The Ld CIT(A) confirmed both the additions and hence the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee has stated in the Statement that she was not aware of any of the directors of M/s Sunrise Asian Ltd. Further, the assessee herein is not a regular investor in shares. The impugned transactions of purchase and sale were solitary transactions. He submitted that the AO has proved that the financials of M/s Sunrise Asian Ltd do not justify the market price of shares. He submitted that the Balance sheet and Profit and Loss account details have been extracted by the AO in the assessment order. He submitted that the perusal of Profit and Loss account would show that the above said company did not incur any expenditure on various heads like power and fuel, manufacturing expenses, selling & administration expenses. These aspects would prove that M/s Sunrise Asian Ltd was only having paper transactions. He further submitted that the assessee did not have knowledge of share transactions as evidenced from the replies given by her in the statement taken from her. The Ld D.R further placed his reliance on the decision rendered by the co-ordinate bench in the case of Smt. Asha Rajendra Gupta vs. ACIT (ITA No. 7712/Mum/2019 dated 13-04-2023), wherein the ITAT had confirmed similar type of ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... named M/s Jackson Investments Ltd and has also subscribed to IPOs in some of the companies. Hence it cannot be said that the assessee was completely unaware of share market transactions. We also notice that the assessee has (a) purchased these shares by paying consideration through banking channels. (b) shares of M/s Sunrise Asian Ltd were allotted to the assessee in a scheme of amalgamation approved by Hon'ble High Court of Bombay. (c) dematerialized the shares and kept the same in the Demat account. (d) sold the shares through stock exchange platform (e) received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee. 14. Before us, the Ld A.R placed his ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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. Suresh kumr, 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 evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or eith....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the alleged penny stock of shares of Ramkrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against the assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substanti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nate bench in the case of Smt Asha Rajendra Gupta (supra), wherein the Tribunal had confirmed the additions relating to long term capital gains arising on sale of penny stock. We have gone through the said order passed by the Tribunal. First of all, we notice that none of the binding decisions rendered by Hon'ble jurisdictional Bombay High Court has been referred to by the Tribunal. Secondly, it has been mentioned clearly that the decision has been rendered on the basis of facts prevailing in that case. There cannot be any dispute that the question as to whether the capital gain declared by the assessee is genuine or not has to be decided on the basis of facts prevailing in each case. Accordingly, we are of the view that the decision rendered in the above said case cannot be taken support of by the revenue. 20. Accordingly, in the facts and circumstances of the case, we are of the view that the decisions rendered by the jurisdictional Hon'ble Bombay High Court in the cases cited above shall apply to the present case, since the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the as....