TaxTMI 
TaxTMI 
2024 (9) TMI 1970
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.... 2. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the Assessing Officer's action in reopening the assessment u/s 147 ignoring the rationale provided in the judgment of Hon'ble Jurisdictional High Court Bombay in the case of Voltas Ltd Vs ACIT (2012) 349 ITR 656 (Bom), despite the facts submitted in statement of facts (SOF) before the Ld. Commissioner of Income Tax (Appeals) as well as before the Assessing Officer as follows: a. Prior to issuance of notice u/s 147, the Assessing Officer initiated the inquiry proceedings w/s 133(6) dated 14.01.2020, which were duly responded by way of two letters dated 27.01.2020 discharging the onus cast on the appellant duly represented through an Authorised Representative during the hearing held on 27.01.2020 in respect of genuineness of the impugned transaction to the satisfaction of then Assessing Officer, with no further questions asked. b. Then Assessing Officer expressly noted on 27.01.2020 in his order sheet that details have been verified and placed on record. Thereafter, there is absolutely no whisper in the reaso....
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.... which was based on generic findings of investigation wing, without there being any specific finding against the bonafide investment and sale by the appellant through online platform of recognized stock exchange through the SEBI registered stock broker. 5. On the facts and the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the Assessing Officer's action without appreciating that there is no order of SEBI brought on record that indicts the appellant or her broker for any wrong doing or manipulation and also ignoring the fact that the said scrip continues to be listed on the recognized stock exchange till date. 6. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the addition made under inapplicable section 69A r.w.s. 115BBE of the Income Tax Act, 1961 on account of sale proceeds on sale of shares of Tilak Ventures Limited especially when the transaction is duly recorded in the books as maintained and all relevant material in support of genuineness of transaction had been furnished and were on recor....
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.... u/s 69A r.w.s. 115BBE of the Income Tax Act, 1961 of Rs 2,56,23,308/-. 2. The brief facts of the case that, the assessee is an individual and derives income from capital gains and dividend income on shares. The Assessing Officer (AO) has received information from Investigation Wing that the assessee has earned long term capital gains on sale of shares of M/s Tilak Venture Ltd and after recording the reasons for reopening has issued notice u/s 148 of the Act. In compliance, the assessee has filed the return of income for A.Y 2015-16 on 30.04.2021 disclosing a total income of Rs.49,86,420/-. Subsequently the AO has issued notice u/sec143(2) and U/sec 142(1) of the Act calling for various details, information and evidences in support of the claim. In compliance to notice, the assessee has filed details and clarifications on 5-03-2022 referred at Para 3 of the order. On perusal of the financial statements, the Assessing Officer found that the assessee has disclosed and claimed the exemption U/sec10(38) of the Act of Rs.2,39,92,894/- being long term capital gains on sale of shares of Rs.2,56,23,308/- and called for the information. The AO on verification found that the assessee has ....
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....)order, the assessee has filed an appeal before the Hon'ble Tribunal. 4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in confirming the action of the AO in sustaining the addition under section 69A of the Act overlooking the major facts and submissions made on various dates and that the assessee is a regular investor in shares and securities and derives income from other sources, interest income and the dividend income. The purchase of shares are genuine through banking channels and the assessee has substantiated with various details referred in the assessment order. Further there is no scope for the AO to make the additions based on the surmises and conjectures as the assessee has filed the voluminous documentary evidence in support of the claim. The Ld.AR explained the reasons for purchase of the shares and has sold the shares in the F.Y.2011-12 and F.Y 2014-15 and remaining shares are held by the assessee. The Ld. AR mentioned that the AO has only relied on the investigation report and no independent enquiry conducted. The Ld.AR substantiated the submissions with the synopsis, factual paper book and the judicial decisions and prayed for allowing ....
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....ement reflecting purchase/allotment of shares placed at Page 392 6. The Ld.AR contentions 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 24 months. The Ld.AR demonstrated the sale cum contract notes, computation of long term capital gains, details of investments by the assessee in the F.Y.2014-15, ledger account of stock broker at page 117 to 354 of the paper book. The assessee has sold the shares through SEBI registered broker of BSE & NSE and supported the sale of shares with the sale bills cum contract notes subjected to Securities Transaction Tax (STT) and the demat statement reflecting the sale of shares referred in the paper book and the assessee has held the shares for more than 12 months from the date of purchase for claiming exemption u/sec10(38) of the Act. The assessee has explained about purchase of shares and is a regular investor in the shares/ securities and receiving dividend income and the genuineness of the transac....
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....per share in the year 2003 and sold the same in the year 2005 for Rs. 155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was re- opened 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 conclusivel....
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....oney of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted Held, yes [Para 7] [In favour of assessee] It was revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange- words showed that the shares were purchased for code 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....
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....ed through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under section 10(38) High court by impugned order held that no substantial question of law. arose from Tribunal's order - Whether SLP against said impugned order was to be dismissed -Held, yes (Para 2) (In favour of assessee) 10. Similarly Hon'ble High Court in the case of Pr. 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....
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....credit-Genuineness of share transactions- Assessee offered long- term capital gains arising from sale of shares-On the basis of material seized during the search in the case of various assessee who belong to H group, AO did not accept the capital gains and treated the entire sale proceeds of the shares as income from undisclosed sources under s. 68-Not justified-Fact that the assessee in the group have purchased and sold shares of the same companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence has been produced to establish the genuineness of the sale- Company has confirmed 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 ha....
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.... be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal .- Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TT) (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished. (Paras 11 to 14 & 16) Conclusion: Assessee having established the genuineness of purchase and sale of shares by producing documentary evidence and declaring the purchase and sale price of shares in conformity with the market rates prevailing 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. 12. 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 fac....
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....NVOLVED- ASSESSING OFFICER QUOTING FACTS PERTAIN- ING TO COMPLETELY UNRELATED PERSONS NAME OF ASSESSEE NEITHER QUOTED BY ANY SUCH PERSONS NOR MATERIAL RELATING TO ASSESSEE FOUND IN INVESTIGATION- TRIBUNAL AFFIRMING AND HIGH COURT DIS- MISSING DEPARTMENT'S APPEAL-SUPREME COURT-SPECIAL LEAVE PETI- TION DISMISSED-INCOME-TAX ACT, 1961, ss. 68, 260A. Where the High Court dismissed the Department's appeal saying that no question of law arose from the order of the Tribunal affirming the order of the Commissioner (Appeals) allowing relief to the assessee, and the findings of the Commissioner (Appeals) to the effect that there was no adverse comment 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 ....
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....as allowed relief to the asses- see by placing reliance on the evidence filed by the assessee before the Assessing Officer. I do not find any adversity in the order of the learned Commissioner (Appeals) specifically keeping in view the fact that the Lucknow Benches in a number of cases after relying on the judgment of the hon'ble Delhi High Court in the case of Krishna Devi had allowed relief to various assessees." The concurrent findings of fact have been recorded by the first appellate authority and the Income-tax Appellate Tribunal. Thus, no substantial question of law is involved in the present appeal. The matter is concluded by findings 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." 14. Further the Ld.DR placed reliance on the decision of Hon'ble High Court Of Calcutta in the case Pr, CIT Vs Swati Bajaj (139 taxman.com352), whereas the Ld.AR relied on the ratio of decisions of the Jurisdictional Hon'ble High Cour....
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....hat 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 of time that too when general market trend was recessive. But we find that when there are several decisions of Hon'ble Jurisdictional High Court as stated supra are already in favour of the assessee, the same would prevail over this tribunal and this tribunal need not take cognizance....
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....f the transaction related to shares of M/s ACI Infocom Ltd (in brevity ACI) and M/s Tilak Ventures Ltd (in short, Tilak), which are listed in BSE and Ld.AO has treated this transaction as penny stock transaction. Relying on the information received from DDIT(Inv), U-8(2), Mumbai the transaction of both these shares of thecompaniesare treated as penny stock transaction. The assessee during the impugned assessment year had declared these scrips and transactions in the return of income and generated loss amount to Rs.4,89,840/- related to ACI andamount to Rs.1,008/- related to Tilak which had declared in the books of account of the assessee with the declared turnover. The Ld.AO had treated this income as undeclared income and proceedings under section 148 was initiated and the order was passed under section 147 with the addition of both these losses of Rs.4,89,840/- and Rs.1,008/-which works out to total amount of R.4,89,840/- and the receipt of Rs. 15,28,508/- which is credited into the books of account of the assessee is also added in the total income of the assessee . So, the total amount of Rs.20,18,348/- was added back to the total income of the assessee. Aggrieved assessee filed....
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.... information from any other person like entry operators. Regarding the decision of investment into the share were taken by the directors but minutes book of the company did not reflect any such decision of the directors. In this regard, investigation report had stated that the assessee company was managed and controlled by well-known entry operator Vipul Vidur Bhatt." 6. The ld. AR further has invited our attention to the Recorded Reason of the ld.AO. The relevant paragraph is reproduced as below: - "3. The assesses is beneficiary of share transactions of M/ s. AC I Infocom Ltd and Tilak Ventures Limited during year. In this regard, the Dv. Director of Income-tax (Investigation). Unit 8(2). Mumbai informed that the assessee has made sales Transactions of shares of these scrip of M/s. AC I Infocom Ltd and Tilak Ventures Limited for the value of Rs.47,05,060/- and Rs. 15,27,500/- respectively during the FY 2014-15. 5. After that the return of income of the assessee is verified and found that the assessee has business of trading-others during the year. The assessee has disclosed total credit of with turnover of Rs.52,96,87393/- in the profit & loss account i....
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.... well as in Ankita A. Choksey (supra). In paragraph 6 thereof, it has been observed that the reasons to believe that income chargeable to tax has escaped must be based on correct facts and if the facts as recorded in the reasons are not correct and the assessee points out the same in his objections then the order on objections must deal with the same and prima facie establish that the facts stated in its reasons as recorded are correct. If the Assessing Officer has proceeded on fundamentally wrong facts to form reasonable belief that income chargeable to tax has escaped assessment and the Assessing Officer while disposing of the objections does not deal with the factual position asserted by the petitioner, it would be safe to conclude that the Revenue does not dispute the facts stated by the petitioner. On such facts, there could be no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment." 8. He further relied on the order of Abhay Kumar Daga HUF vs ITO ITA No., 176/Jodh/2022 (Jodh. Tri), the observation of the Hon'ble Tribunal is as under: "5. The next issue is regarding exemption u/s 10(38) of the Act. 5.1 During s....
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....attention to the submission furnished before the authorities below regarding the details of long term capital gain (APB, Pg.56) and the details of payment made through cheque at the time of purchase (APB, Pg.57). The appellant further referred to the copy of broker Nine Star Commodities (APB, Pgs.59 and 61) and broker note for purchase and sale of shares (APB, Pgs. 73 to 79)." 9. The Ld.DR argued and fully relied on the order of the revenue authorities. 10. We heard the rival submissions and considered the documents available on the record. The assessee had made the transactions and generated loss through the transaction of scripts ACI and Tilak. The assessee's holding was more than 2 years. There is no such direct communication reflected in the order of the Ld.AO that the entire transaction was made a sham transaction. In the observation of recorded reasons, the Ld. AO mentioned that the transactions are undisclosed whereas during the assessment and appellate stages before the authorities were unable to substantiate that the entire transaction was not disclosed in the return. In recorded reason the ld. AO specifically mentioned that the transacted amount is n....
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....- was filed on 30.09.2015. The case was subjected to scrutiny assessment and assessment under section 143(3) of the Act was passed on 18.12.2017 determining the assessed income at Rs. 6,76,11,000/-. Subsequently the case was reopened on the basis of information received from central circle-2(2), Kolkata wherein it was informed that M/s. Tilak Venture Ltd. was a penny stock listed on BSE and this company had been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain or STCL in their books of accounts. Thereafter the case of the assessee was reopened by issuing a notice under section 148 of the Act on 23.12.2021. The assessment under section 147 read with section 143(3) of the Act was finalized on 31.03.2022 assessing the total income at Rs.6,85,56,801/-. Further facts of the case are discussed while adjudicating the ground of appeal filed by the assessee. Ground No.2: Disallowance of loss of Rs.4,93,135/- being trading loss 15. During the course of assessment the AO stated that the scrip M/s. Tilak Venture Ltd. has been used to provide bogus LTCG to various beneficiaries. After perusal of the detail fil....
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....facts and materials placed on record we find that the lower authorities could not substantiate that the assessee has obtained LTCG & STCL by trading in the scrip M/s. Tilak Venture Ltd. since the assessee has reported the same as trading loss under the head business income. 22. In view of the above facts and circumstances we do not find any justification in the findings of Ld. CIT(A). Therefore, ground No.2 of appeal of the assessee is allowed." 17. The Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax Vs. Kuntala Mohapatra, [2024] 160 taxmann.com 608 (SC), dated 04.03.2024 has observed as under: SLP dismissed against order of High Court that where shares were purchased via account payee cheques, held in Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax assessee was eligible to claim exempt 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 long term securities (Illustrations) - Assessment year 2014-15 Assessee filed its return for relevant....