TaxTMI 
TaxTMI 
2025 (3) TMI 2177
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty shares, acquired through dealings on recognised stock exchange through registered brokers subjected to collection of STT, sold on recognized stock exchange at the prevailing quoted rate after holding for more than one year as unexplained cash credit disregarding the supporting documentary evidences furnished merely on the basis of untested report of D.I. Kolkata but without bringing any adverse evidence or material on assessment record. 2. That the alleged denial of exemption claim made u/s 10(38) and alleged addition made u/s 68 at Rs. 76,13,000/- is wrong on facts, bad in law and without discharging onus casted since the copy of information and documents received from Investigation Directorate, Kolkata have been relied upon by the Id. CIT(Appeal), NFAC as well as by the Id. A.O. without verification and adjudication thereof and without establishing any connect of assessee appellant with operators or people alleged to involved in rigging of share price and assessee appellant has not been provided with such material thus denying the opportunity of cross examination and or rebuttal of the wrong allegations in gross violation of principal of natural justice. In v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is of the information received from the Investigation Directorate, he treated the LTCG as arranged transaction on penny stocks holding the sale proceeds thereof as unexplained cash credit u/s. 68 of the Act. Also, he estimated payment of commission at the rate 5 per cent to the alleged entry providers on the total sale proceeds of Rs. 76,13,000/- by working it out at Rs. 3,80,650/- and adding u/s 69C of the Act as unexplained expenditure. 4. In the subsequent appeal before the ld.CIT(A),the assessee repeated the above contentions arguing further that the AO merely based on the information and without making any independent verification or ascertaining the veracity of the same, treated the LTCG as arranged transaction and sale proceeds of the same as unexplained cash credit u/s 68, without providing the copy of information, evidences collected, statement of other persons and materials relied upon to make the addition in gross violation of principle of natural justice and also without bringing any adverse evidence on record. The assessee was never provided the opportunity of cross examination of person/witness either by the ld. AO or the Investigation Directorate of Kolkata, whose....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laced on the judgment of jurisdictional High Court in the case of CIT v/s Lavanya Land Private Limited (2017) 83 taxmann.com 161 (Bom) which refers that when there is no direct and clear evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit providers whatsoever to convert unaccounted money for getting benefit of long term capital gain, no presumption can be drawn to hold otherwise. In the said case the Hon'ble High Court has held that in absence of any tangible material to show that cash was transferred from one side to another, addition cannot be sustained. It is a trite law that the suspicion howsoever strong cannot partake the character of legal evidence. Reference is made to the judgement of Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram Vs CIT (1959)37 ITR 288(SC). It is further contented that entire case of the revenue hinges upon the presumption that the assessee has ploughed back his own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es as these companies have no credentials and this helps the operator to keep a control on the price movement of the shares. The name of scrip SCFL is appearing in the list of 'Penny Stock', which has been used for generating bogus LTCG. Since the assessee has dealt in this penny stock of this company, assessee is one of the beneficiaries of accommodation entry for LTCG. Further, the Operators and Brokers have confirmed in their statements recorded on oath during the course of investigation that they are engaged in fraudulent billing activities and providing the accommodation entries of share bills of purchase and sale entries for commission through a number of Private Limited Shell Companies and some listed Penny Stock Companies. Further, the financials of the company also does not support such huge increase in the value of the shares. Inquiry into the money trial by the investigation department has unearthed the money movement from undisclosed proprietorship accounts, where cash is being deposited mostly to the 'Jamakharchi companies' who are registered as clients with the share brokers. From the Jamakharchi client company account, money gets transferred to beneficiaries of LTCG ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in. In view of the short duration of these transactions and the weak financials of the scrip whose shares were transacted, the AO has brought sufficient material on record to establish that unaccounted money of appellant was introduced in the books of accounts through long term capital gain by adopting such scheme with the connivance of different players. He finally concluded that these transactions were nothing but sham transactions. Accordingly, action of the AO was upheld and the claim of exemption u/s 10(38) of the Act was denied and the addition of Rs. 76,13,000/- u/s 68 of the Act was sustained. The ld.CIT(A) also upheld the addition in respect of alleged commission paid in this regard by observing that as pointed out by the AO in the impugned order, enquires in the scheme revealed that commission @5% was charged for arranging artificial capital gains to various beneficiaries, which is also applicable to the case of appellant. 5. Before us, the ld.DR has relied on the orders of authorities below while the ld.AR has reiterated the contentions as made before them which has already been narrated in the preceding paras. Further, Ld.AR of the assessee brought to our notice the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tween Rs. 79/- to Rs. 86/- per share. He has also stated that the entire shares of purchases through stock exchange by online through registered broker and the shares were purchased when the financial condition of the said company was good and the profits were substantially increased including the turnover which was in several crores. He has also stated that the assessee nor any of the family member had any connection or business with the promoters of the company or any kind of alleged exit providers. Now in the case of her husband, Shri Rajendra Chaturvedi, the coordinate bench on exactly similar facts and reasoning of the AO and CIT(A) has deleted the said addition. 20. The AO has observed that the prices of the shares had reached upto 500/- per share to show assessee has gained multifold, however, assessee had sold the price changing price between Rs. 79 to Rs. 86/- per share which was quoted price in the Bombay Stock Exchange on which rate such shares were traded and had bought the shares at average price of Rs. 20/- per share. However, the main point which has been discussed at length by the ld. AO in his order that in the case of exit providers, there is the order of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee, which has now been found by SEBI in its final order that there was no such manipulation by the these entities. In any case, firstly, the said SEBI order has nothing to do with the scrip of M/s. Shreenath Commercial & Finance Ltd. and secondly, the revocation of this order by the SEBI in its final order dated 21/09/2017 itself demolishes the entire foundation of the AO's inference. 21. Apart from that, no enquiry either by the SEBI or any Government agencies has been done in the case of M/s. Shreenath Commercial & Finance Ltd. or the broker from whom assessee has purchased online or the assessee or the family member. In so far as one of his observations that one Shri. Giriraj Kishore Agarwal was the promoter, Director of various entities including M/s. Shreenath Commercial & Finance Ltd., he became the Director of this company on 10/11/2016. i.e., after more than 3 ½ years, when the assessee had sold shares through Bombay Stock Exchange. In any case, the adverse inference of common link of Shri Giriraj Kishore Agarwal was discharged by the final SEBI order dated 29/11/2017. Therefore, tenuous connection made by the ld. AO to link M/s. Shreenath Commercial & F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted by the accommodation entry provider for bogus capital gain including the assessee, at least there has to be some prima facie or some mention about the assessee or about the scrip from such enquiry so as to draw some kind of adverse inference. 23. In so far as various reports of the ld. AO and ld. CIT(A) by and large are same and ld. AO has stated that nothing new has been brought on record. Though there are decisions cited by both the parties and also assessee had cited various decisions of the Hon'ble Bombay High Court as mentioned above wherein the Hon'ble Bombay High Court had held that where the transactions have been made both purchase and sales through online and there is no adverse material or information except with some brokers have stated in their statement that they have provided accommodation entry in various scrips in one such scrip involved, that does not lead to drawing any adverse inference to treat the share transactions as bogus done through stock exchange. 24. Be that as may be, we find that on exactly similar set of facts and identical finding, this Tribunal in the case of the assessee's husband Shri Rajendra Chaturvedi and Mrs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is beneficiary of a big racket whereby the prices of the shares were rigged and manipulated to yield bogus gain to various entities/individuals of which assessee was one. Thus, we find merit in the arguments of the Ld AR that assessee has furnished all the information. details, documentary evidences before the AO but the AO has not done any further verification to find out the truth or done anything to prove the money trail of the funds as has been alleged in the order. Under these circumstances, we are not in a position to sustain the order of Ld. CIT(A) upholding the order of AO wherein the long-term capital gain has been held to be non genuine and bogus." 25. Once on the same set of facts the Co-ordinate Bench have deleted the said addition, then in the case of the assessee, no different view can be taken. Respectfully following the same, addition made by the ld. AO is deleted including the addition of alleged commission made u/s.69C, which is deleted. Thus, on merits, appeal of the assessee is allowed." 6. We have also gone through several others decisions of the coordinate bench involving same scrip, deleting similar additions. It may be relevant to mention here th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is a beneficiary of these bogus long term capital gain entries. Nowhere the AO has brought on record any other evidence than relying on the report of investigation wing that the assessee is beneficiary of this huge racket of taking bogus entries of long term capital gain. The AO has disbelieved these documents by observing that these are sham and bogus documents without pointing out any specific defect or infirmity as these were issued as per the system of the recognised stock exchange through registered brokers. Similarly, the Ld. CIT(A) has upheld the order of AO by holding that the assessee is beneficiary of a big racket whereby the prices of the shares were rigged and manipulated to yield bogus gain to various entities/individuals of which assessee was one. Thus we find merit in the arguments of the Ld A.R. that assessee has furnished all the information's, details, documentary evidences before the AO but the AO has not done any further verification to find out the truth or done anything to prove the money trail of the funds as has been alleged in the order. Under these circumstances, we are not in a position to sustain the order of Ld. CIT(A) upholding the order of AO wherein....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 25,93,1507-.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 DM AT 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 transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Co....