TaxTMI 
TaxTMI 
2024 (7) TMI 1806
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....e claim of long term capital gain u/s 10(38) without considering the written submission. 3. The Ld. CIT(A) erred in confirming addition on account of penny stock. 4. The Ld. CIT(A) erred in confirming addition u/s 69C by way of 3% commission on sale proceeds of shares on the basis of assumption without considering the written submission. 5. The appellant craves to add, alter, amend any ground of appeal. 3. The brief facts of the case are that, the assessee is engaged in the business and derives income from business, income from capital gains and income from other sources. The assessee has e-filed the return of income for the A. Y 2013-14 on 28.11.2013 disclosing a total income of Rs. 9,39,760/-. Subsequently, the Assessing Officer (AO) has received information from Kolkata Investigation Wing and after recording the reasons for reopening of assessment has issued notice u/sec 148 of the Act. In compliance to notice, the assessee has filed the letter to treat the return of income for the A.Y 2013-14 filed on 28.11.2013 as due compliance. Further reasons for reopening of reassessment was provided to the assessee and the objections were filed on 03.10.2017 ....
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....actions are not genuine and made addition of sale/trade value of Rs.2,41,00,000/- and estimated commission expenditure @ 3% of trade value u/sec 69C of the Act which works out to Rs.7,23,000/- and assessed the total income of Rs.2,57,62,760/- and passed the order U/sec143(3) r.w.s147 of the Act dated 20-12-2017. 4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). The CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO but has confirmed the action of the AO and sustained the addition u/sec68 & u/sec69C of the Act and dismissed the assessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon'ble Tribunal. 5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the additions under section 68 & 69C of the Act overlooking the facts and submissions that the purchase & sale of shares are genuine and the assessee has substantiated with various details with the both the authorities. Further, there is no scope for the AO to make the additions based on the surmises and conjectures as the assessee has filed the documentary material evidences in support ....
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....ntions are that the assessee has filed the documentary evidence to justify the genuineness of the purchases, sales and the long term capital gains as the assessee has sold the shares on the recognized stock exchange where the STT has been paid in respect of listed shares and the shares are held for more 12 months. The Ld.AR demonstrated the sale cum contract notes at page 73 to 81 of the paper book and sale proceeds credited to bank account and the primary documents filed by the assesse were not discredited by the A.O. Further the Ld.AR relied on the Bhav copy disclosing prevailing selling price of shares from the BSE Portal. The statements of others recorded by the revenue was not provided and request for cross examination was rejected. Further the Ld. AR demonstrated the Company Master Data (CMD) of the company shares traded by the assessee from the MCA portal disclosing the status as Active. We find that the assessee has purchased these shares on preferential allotment basis and supported with the sources of acquisition and the shares were credited to demat account on 31.10.2011 placed at Page 67 of the paper book. Further the Ld.AR relied on the material information, evidenc....
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.... the fact the preferential allotment is in accordance with the approval of Bombay Stock Exchange and hence the transaction including the purchase price cannot be doubted with any of the facts. 3.2 Purchase through Banking channel with established source. The appellant has paid Rs. 30,85,000 by way of share application money for subscription of preferential allotment of 22,000 shares, the payment was made through banking channel. The copy of bank statement was submitted during the course of assessment proceedings. The immediate source for application in preferential allotment is receipt of loan from the HUF of father Shri. Rajhans Singh HUF. In view of the fact the investment is made through banking channel and source is established by way of receipt of loan from the HUF of father of the assessee. The purchase price is Rs. 175 per share which is approved by stock exchange. Considering the price, it cannot be treated as penny stock. 4. Disallowance of exemption u/s 10(38) treating undisclosed income u/s 68. 4.1 The Learned Assessing Officer erred in making addition of sale proceeds u/s 68 of Rs 2,41,00,000/- (actual sale proceeds is Rs. 2,40,39,775....
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....lt of BSE where the identity of the buyer and his broker is not disclosed. There was a boom in NBFC companies' prices. It is stated in the showcause notice that the prices of NCL was Rs. 1.11 per share on 08/02/2011 which is a very basis of analyzing the price as a penny stock but in fact the price of NCL was ranging between Rs. 30 to Rs 60 between 08/02/2011 to 08/03/2011. The analysis was based on the incorrect price of shares. The very basis of analysis of price is based on incorrect data. The appellant has purchased the shares on the basis of tip and hence the information about the working and net worth is unwarranted and irrelevant. The statement of Mr. Poddar the MD of the company is irrelevant because the appellant has not dealt with either at the time of purchase or at the time of sale with the said party. The statement recorded at the back of the appellant without affording the opportunity of cross examination cannot be used for making addition. It is learned that the said party' has retracted the statement recorded. The statement of appellant was recorded u/s 131 and nothing is proved against the genuineness of transaction. The assessee has not transacted with Mr.....
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....s 68 The Learned Assessing Officer has made additions u/s 68 disallowing the exemption u/s 10(38) of long term capital gain on sale of shares on which STT is paid. The appellant has established the identity of the transaction by submitting various documents / papers and bank statement. Further the transaction is rooted through banking channels. The transaction of sale is rooted through bolt of BSE where the identity of prospective purchaser is not disclosed, it clearly shows the genuineness of transactions. The shares are purchased at Rs 175/- and the same is sold at the average price of Rs 1,397/- i.e. 8 times do not result into penny stock transaction and hence the transaction of sale of shares through Bombay Stock Exchange in which identity of purchaser is not known clearly shows the gentility of transactions. In view of the fact identity of the transaction rooted through banking channels proves the genuineness of the transaction. The reliance is placed on judgement of Jurisdictional ITAT Mumbai in the case of ITO v. Arvind Kumar Jain HUF it was held that bogus capital gain: if demat account and contract note showed details of share transactions and th....
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....d Commercials Ltd. reported in 202120 Taxman 282 dated 23/03/2001, it was held that "Admittedly the details of purchase and sale of shares were furnished. The payment and receipt were by account payee cheque. The identity of seller and purchaser was not in dispute. The disallowance was basically made on the ground that the assesse failed to produce the brokers for verification of the transaction. Following the view on a similar issue in the case of CIT Vs Carbo Industrial Holding Ltd (2000) 244 ITR 422 (Cal), non-production of the shares broker by the assesse did not disentitle it for claim of loss in a genuine transaction of shares, thus, the Tribunal's finding was based on material and not perverse. The findings of the ITO and the Commissioner (Appeals) were based on presumption." The reliance is also placed on the judgement Shri Dollarai Hemani Vs ITO ITAT Kolkatta it was held that when the shares transactions are supported by proper contract note delivery through demat account and bank statement then long term capital gain cannot be denied to the assesse. (A copy of order is placed on page no. 108 to 121) Further reliance is placed on the judgment of Manis....
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....3 Sale transaction through online trading of BSE known as Bolt. The appellant has sold the share through online trading through computer known as Bolt to BSE, In such trading identity of purchaser of broker of purchaser is not known in such situation it cannot be presumed there could be any transfer of cash between buyer and seller to convert unaccounted money into accounted money as alleged by the Assessing Officer. It was held in the judgement of Hon'ble Bombay High Court in the case of CIT Vs Lavanya Land Pvt Ltd (2017) 83 ITR Com 161(Bom) to contend that there was no evidence whatsoever to allege that money changed hands between the assessee and broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. In the said case, the Hon'ble High Court held that in absence of any material to show that huge cash was transferred from one side to another, addition cannot be sustained. In the present case before your Hon'ble under consideration there is no such evidence brought on record for transfer of cash from the appellant to the operator even though his placed was raided. ....
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....ost of shares. It is merely a change of opinion which cannot form the part for reason of opening. 6.0 Disallowance of unexplained expenses u/s 69C of Income Tax Act. The Learned Assessing Officer erred in estimating 4% commission charged on addition of Rs. 7,23,000/- u/s 69C. This is a purely guess work and no documentary evidence is provided for estimating disallowance of expenses." 7. Further the Ld. AR submitted that the assessee has sold the shares through SEBI registered broker of BSE and supported with the sale bills cum contract notes subjected to Securities Transaction Tax(STT) and the demat account statement reflecting the sale of shares. The assessee has held shares for more than 16 months from the date of purchase on 9-9-2011. Further the statement of the assessee was recorded u/sec131 of the Act by the Assessing officer and the assessee affirmed the genuineness of share transactions with the documentary evidences. The Ld.AR emphasized that the assessee is only a investor and was not involved in the price rigging of shares and no enquiry was conducted by the SEBI and BSE against the assessee. The Ld. AR relied on the fallowing judicial decisions in s....
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....ed under Section 148 of the Act. 4. The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under Section 68 of the Act While allowing the appeal filed by respondent, the CITIA] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year After a period of one year....
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....ode numbers S003 and R121 of STPL and RMPL pectively. Out of these two, only RMPL is listed in the appraisal report and it is stated to be involved in dus operandi It is on this material that the Assessing Offices holds that the transactions of sale and purchase of shares are doubtful and not genuine. In relation to assessee's role in all this, all that the Commissioner observed is that the assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the assessee to the accounted income and the assessee utilized the scheme Para 5] The Tribunal concluded that there was something more which was required, which would connect the 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 cared forward by the reven....
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....CIT Vs. Prem Pal Gandhi, (401 ITR 0253) (P & H) has observed as under: Capital gain-Share transaction-Addition-Deletion thereof-During course of assessment proceedings u/s 153A, it was noticed by AO that assessee had shown long term capital gain on sale of shares of company-AO treated share transaction as non-genuine transaction and amount was shown as long term capital gain on share transaction was added to income of assessee-CIT(A) deleted addition-Tribunal upheld order passed by CIT(A) and dismissed appeal of revenue-Held, assessee sold shares through MTL shares and Stock Broker limited which was SEBI registered Stock Broker- Payment for sale of shares was received through banking channels-All documentary evidence being in favour of assessee, deletion of addition made by CIT(A) was upheld by Tribunal-All these documentary evidences in favour of assessee were rejected by AO merely on basis of some casual replies given by assessee to AO- Documentary evidences were in favour of assessee and CIT(A) had passed very reasoned and speaking order-Dividend amount was received with regard to holding of shares and said amount was disclosed by assessee in his return of income and ex....
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....firmed that it has handed over the shares purchased by the assessee-Similarly, the sale of shares to the respective buyers is also established by producing documentary evidence-Purchase and sale price of the shares declared by the assessee is in conformity with the market rates prevailing on the respective dates-Thus, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions-Tribunal has arrived at a finding of fact that the transactions were genuine-Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence-Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessee-Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. The fact that the assessee in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuine....
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....vailing on the respective dates, the finding of the Tribunal that the transactions were genuine is a finding of fact based on documentary evidence on record and, therefore, no substantial question of law arises from the order of the Tribunal deleting the addition under s. 68. 13. Similarly Hon'ble High Court of Bombay in the case of Pr.CIT-3 Vs. Ziauddin A Siddique. Income Tax Appeal No 2012 of 2017 order dated 4 March 2022 has observed as under: 1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/ acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the IT. Act, 1961?" 2. We have considered the impugned order with assistance of the le....
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....omment from the stock exchange or the company whose shares were involved in these transactions, that the Assessing Officer quoted the facts pertaining to completely unrelated persons whose statements were recorded and on the basis of unfounded presumptions, that the name of the assessee was neither quoted by any of such persons nor was any material relating to the assessee found at any place where investigation was done by the Investigation Wing, on a petition for special leave to appeal to the Supreme Court special leave to appeal to the Supreme Court The Supreme Court dismissed the petition. Decision of the Allahabad High Court (printed below) affirmed. Petition for Special Leave to Appeal (C) No. 13033 of 2023. Petition under article 136 of the Constitution for special leave to appeal from the judgment and order dated July 6, 2022, of the Allahabad High Court in I. T. A. No. 44 of 2022. The judgment of the High Court (coram: SURYA PRAKASH KESARWANI and JAYANT BANERJI JJ.) ran as follows: "JUDGMENT Heard Sri Krishna Agarawal, learned counsel for the appellant. This appeal under section 260A of the Income-tax Act, 1961 has been filed ch....
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....dings of fact. For the reasons aforestated, we do not find any good reason to entertain this appeal. Consequently, it is dismissed. Balbir Singh, Additional Solicitor General, (Raj Bahadur Yadav, Prahlad Singh, Samarvir Singh and Prashant Rawat, Advocates, with him) for the petitioner." 15. The Ld. AR has furnished the data from the MCA Website on the status of the company, which is active compliant and the investee company i.e M/s NCL Research and Financial services Ltd has filed the last Balance sheet dated 31-03- 2023 and the Annual General Body meeting was held on 12-09-2023. Subsequent to the assessee selling the shares in F.Y.2012-13, the shares of the company are traded regularly and company has paid dividend on shares, issued bonus & rights shares and stock split of the shares as per the MCA data details filed by the assessee. The Ld. AR contentions are that the assessee is only a investor and has purchased the shares of other companies and similarly disclosed in the financial statements and were also sold and earned long-term capital gains. Further the assessee has purchased these shares at a premium on preferential allotment basis and consideration was paid th....
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....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 substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs. 5.14. We find that the ld. DR had relied on the decision of Hon'ble Calcutta High Court in the case of PCIT us Swati Bajaj reported in 139 taxmann.com 352 which is an elaborate decision rendered after considering various decisions of various High Courts on the subject. In the said decision, it was held that assessee had to establish the genuineness of rise of price of shares within a short period....
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....search and Financial services Ltd dealt by the Coordinate bench of this Tribunal in ITA No. 4581/Mum/2018 in the case of Smt Priya Rahul Abhani Vs. ITO and has granted relief observing at Para 2 to 10 of the order read as under: "2. The facts of the case are that the assessee filed his return of income declaring long term capital gains of Rs. 3,63,356/- and claimed the same as exempt u/s 10(38) of the Act. The assessee had sold 1000 shares of M/s NCL Research and Financial Services Ltd for a value of Rs. 14,20,000/- in April, 2013. The assessee had purchased the above said shares in April 2012 for a consideration of Rs.1,79,648/-. The assessee had also sold shares of M/s Dhanus Technologies Ltd for a sum of Rs.5000/-. The same had been purchased for Rs. 11,40,028/- and hence there was a loss of Rs. 11,35,028/- from this transaction. The assessee had received bonus shares from M/s Dhanus Technologies Ltd and the same was sold for Rs. 12,000/-, The AO received information from investigation wing that the trading in above said shares falls under the category of suspicious long term capital gains on shares, since they have been put under Surveillance measure by SEBI. The AO, a....
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....ging of prices of the shares with the fraudulent motive of generating tax exempt capital gains. The revenue has identified suspicious share transactions and the shares of M/s Sunrise Asian Ltd were one of such shares. He submitted that the directors of the above said company has admitted the price rigging. Accordingly he submitted that the Ld CIT(A) was justified in confirming the addition. 6. The Ld A.R, in the rejoinder, submitted that the assessing officer has made the addition entire sale consideration as income. He submitted that the Hon'ble Rajasthan High Court has upheld the order of Tribunal in deleting an identical addition in the case of CIT vs. Smt. Pooja Agarwal (D.B. Income tax Appeal No.385/2011 dated 11.09.2017), since the shares were transacted through Stock Exchange. He submitted that the assessee, in the instant case also, has transacted the purchase and sale transactions through stock exchange only. He further submitted that the assessee has purchased and sold shares of other companies also, list of which is furnished in the paper book. 7. I have heard rival contentions and perused the record. I notice that the AO has received information ab....
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....ded for reopening the assessment as well as the statement/ information on the basis of which the reassessment proceedings were initiated to the assessee. During the reassessment proceedings, it was observed that the assessee has purchased shares of NCL Research for Rs. 74,82,700/- and sold the shares for Rs.15,37,500/- in the year under consideration. Accordingly, the assessee booked loss of Rs.59,45,200/- from the aforesaid transaction. Similarly, the assessee has purchased shares of M/s Shreenath for Rs. 2,54,03,590/- and sold the shares for Rs.94,25,954/- in the year under consideration. Accordingly, the assessee booked a loss of Rs. 1,59,77,636/-. The AO on the basis of statement recorded by the Investigation Wing of certain persons, who alleged that the aforesaid companies were mere penny stock companies, treated the entire loss of Rs. 2,19,22,836/- as short- term capital loss from trading in shares and added the same to the total income of the assessee vide order dated 04/12/2017 passed under section 143(3) r/ w section 147 of the Act. 6. The learned CIT(A) vide impugned order allowed the appeal filed by the assessee, by observing as under: "7.3. The assesse....
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....s operandi. It is on this material that the Assessing Officer holds that the transactions of sale and purchase of shares are doubtful and not genuine. In relation to assessee's role in all this, all that the Commissioner observed is that the assessee transaction through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the assessee to the accounted income and the assessee utilised the scheme. [Para 5] The Tribunal concluded that there was something more which was required, which would connect the 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. A copy of the DMAT account, placed before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers wer....
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....firmation of the transactions of buying and selling of the 'said shares' by the respective stock brokers, receipt of sale proceeds through banking channels, etc. As observed earlier in this order, we are of the view that the statement recorded from Shri Niraj Sanghvi on 31 12 2007, the day the order of assessment was passed, would have no evidentiary or corroborative value to be the basis for coming to an adverse view in the case on hand, since it was recorded behind the assessee's back, from a person who was not involved in the purchase of the said shares and also since the assessee was not afforded opportunity for rebuttal of the same and to cross-examine the said person. We are also of the view that the ratio and the factual matrix of the decisions in the cited case, i.e. JatinChhadwa (supra), Harkchand K. Gada (HUF) & others (supra) and Andaman Timber Industries (supra) would be applicable and support the case of the assessee since no adverse finding has been rendered in respect of the direct material evidence placed on record in respect of her transactions of purchase and sale of the 'said shares' of M/s. Shukun Constructions Ltd. which stand duly disclosed....
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.... AR") submitted that the assessee is a trader in shares since the past two decades. It was further submitted that the transaction in shares of the aforesaid companies was made through the broker who is registered under SEBI. The learned AR further submitted that the copy of contract notes, broker notes, and Demat account was provided by the assessee in support of the aforesaid transactions before the lower authorities. The learned AR also submitted that during the year the assessee has earned a speculation gain of Rs. 99,42,164/-, which has been duly recorded in his books of account and the loss arising from the transaction in shares of aforesaid companies is on account of regular share trading. 9. We have considered rival submissions, perused the material available on record, and the decisions relied upon by both parties. In the present case, it is evident that the assessee is engaged in the business of shares and stocks broking. The aforesaid fact is also evident from the profit and loss account, on page 2 of the paper book, wherein the assessee has duly credited the consideration from the sale of shares and speculation gain. Further, the assessee has also debited the De....
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.... "SLP dismissed against order of High Court that where shares were purchased via account payee cheques, held in a Demat account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax assessee was eligible to claim exemption u/s 10(38) for long term capital gains." "Section 10(38), read with sections 68 and 69, of the Income-tax Act, 1961 Capital gains Income arising from transfer of long term securities (Illustrations) - Assessment year 2014-15 Assessee filed its return for relevant year - Subsequently, pursuant to a survey assessee filed revised return and claimed exemption in respect of long-term capital gains on shares under section 10(38) - Assessing Officer rejected assessee's plea and made additions under sections 68 and 69 by relying on statements from 'entry operators' On appeal, Commissioner (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax Tribunal upheld Commissioner (Appeal)'s decision, emphasizing assessee's r....