TaxTMI 
TaxTMI 
2024 (10) TMI 1803
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....g the exemption claimed u/s 10(38) of the Act in respect of long term capital gain derived from sale of shares of CCL International Ltd, in the facts and circumstances of the case. The inter connected issue involved therein is whether the ld. NFAC was justified in confirming the addition @ 3% of transaction amount of long term capital gain as unexplained expenditure u/s 69C of the Act in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. The assessee is a HUF having income from house property, capital gains and other sources during the year under consideration. The return of income for the Asst Year 2013-14 was filed by the assessee on 31.7.2013 declaring total income of Rs 72,71,110/- and exempt income u/s 10(38) of the Act of Rs 14,07,66,123/- being Long Term Capital Gain (LTCG) on sale of equity shares of listed company M/s CCL International Ltd after payment of Securities Transaction Tax (STT). 4. The following factual points require consideration:- a) Shri Dharmendra Bhandari (Individual) applied for allotment of 1000000 equity shares having face value of Rs 10 each of M/s AAR Infrastruc....
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....cognized stock exchange ; Demat statements of Individual and HUF duly showing the credit of shares to the respective account, gift of shares from Individual to HUF account, debit of shares from the Demat account due to sale of shares in the open market ; and sale contract notes issued by the registered share broker. i) The Demat Statement of the assessee also reflects that the assessee was also holding the shares of other listed companies in its kitty. j) M/s CCL International Ltd is incorporated in 1991 engaged in the business of construction of infrastructure projects, civil engineering works, including work contract operations and land / plots/ residential units commercial complex and trading division of the company is engaged in trading of ferrous and non-ferrous items. The company's business divisions included Chirawa commodities and Creteroads Construction. The Chirawa commodities division focused on trading of iron and steel, cotton fabrics, among others. The company's product range includes angles, beams, channels, thermo mechanically treated (TMT) and hot rolled coil and sheets. The Creteroads construction division focused on the construction / reconstruc....
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....ice ranging from Rs 131 to Rs 145 per share. After the sales made by the assessee, the share price had actually jacked up several times and reached the pinnacle of Rs 3000 per share and even on the date of presentation of graph by the ld AO in page 11 of his order the share price was Rs 1478.50 in the BSE. We find that the said scrip is still listed in the BSE as on the date of passing of this order. At the outset, given the financials of the said company, we hold that the said company cannot be categorized as a Penny Stock Company and hence the entire allegations of the lower authorities in their orders fall flat as they are absolutely without any basis and devoid of merit. Moreover, the ld AO relies on 3 statements of persons who are claimed as brokers / entry operators. None of them had even mentioned either the name of the assessee or his broker HDFC Securities Ltd. Hence there is absolutely no evidence brought on record by the revenue that either the assessee or his broker had connived with the so called entry operators / brokers for artificial rigging of market prices of shares of M/s CCL International Ltd. Even the request of the assessee to cross examine those persons durin....
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....which was heavily relied upon by the ld DR. Hence in our considered opinion, the reliance placed on SEBI order does not advance the case of the revenue in the facts and circumstances of the instant case. 7. The main grievance of the ld. AO is that rise in share price of CCL International Ltd is devoid of commercial principle or market factors; that transactions are based on mutual connivance on part of assessee and operators; that assessee resorted to preconceived scheme to procure bogus long term capital gains and hence the transactions are not bonafide; that these are close circuit transactions and are pre-structured; that assessee had failed to discharge his onus cast on her; that net worth of CCL International Ltd is negligible and that its share prices were artificially rigged ; that investigations prove that cash is routed through various accounts to provide these bogus long term capital gain entries. The ld. AO by making these observations proceeded to treat the LTCG portion arising on sale of shares of Rs 14,07,66,123/- alone as unexplained cash credit u/s 68 of the Act. Meaning thereby, the cost incurred by the assessee on purchase of shares in the sum of Rs 40,00,000/-....
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....t and sale of shares are through Demat account. More so, when there is no dispute regarding the purchase price and sale price of shares. Our view is further fortified by the decision of Hon'ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom) wherein it was held that - "From the documents produced before the Court it was seen that the shares in question were, in fact, purchased by the assessee on the respective dates and the company had confirmed to have handed over the shares purchased by the assessee. Similarly, the sale of the shares of the respective buyer was also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessee were in conformity with the market rates prevailing on the respective dates, as was seen from the documents furnished by the assessee. Therefore, the fact that some of the transactions were off-market transactions could not be a ground to treat the transactions as sham transactions. On a perusal of those documentary evidences, the Tribunal had arrived at a findin....
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.... by SEBI pointing out the malpractices by certain parties and taking action against them. In the instant case, SEBI had not passed any adverse order on the assessee or his broker HDFC Securities Ltd and had not even named both of them in their order. There is absolutely no whisper as to the fact whether the assessee or his broker HDFC Securities Ltd were subjected to any investigation or enquiry by SEBI. Hence the transaction carried out by the assessee cannot be termed as bogus. 11. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus. In our considered opinion, the ld. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This v....
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..... We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful an....
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.... carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be place....
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....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 in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. 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)/1....
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....y 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 (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (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, inter alia, 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 ....
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....s regard is placed on the decision of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT reported in 80 taxmann.com 284 (Mumbai-Trib.)(SB). The Tribunal observed as under: "46. ......... Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of "preponderance of probability" is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially....
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.... ld. AO but he miserably failed to substantiate that. The Hon'ble High Court held that the transactions were at the prevailing price and therefore the suspicion of the ld. AO was misplaced and not substantiated. 19. We find that the Hon'ble Calcutta High Court in the case of CIT vs Shreyashi Ganguli in ITA No. 196 of 2012 had observed that in that case, the Hon'ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI's action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. We find that the assessee's case before us is in a much stronger footing as no action has been initiated on the Broker by SEBI on the assessee or his broker. 20. We find that the Hon'ble Calcutta High Court in the case of CIT vs Bhagwati Prasad Agarwal reported in [2009 (4) TMI 138 - CALCUTTA HIGH COURT] in ITA No. 22 of 2009 dated 29.4.2009, had observed that the assessee claimed exemption of income from Long Term Capital Gains. However, the ld. AO, based....
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....is bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction. Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case. 11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessee were already shown in the earlier Balance Sheet submitted by the assessee, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one....