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2023 (3) TMI 1431 - AT - Income TaxAddition u/s 68 - bogus LTCG - whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham? - CIT(A) deleted the additions appreciating the contentions of the assessee together with the documentary evidences thereon, especially the final SEBI order wherein the assessee was duly discharged by SEBI as not to be involved in the price manipulation of scrip of Pine Animation Ltd. - HELD THAT:- The transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account 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 [2010 (9) TMI 81 - BOMBAY HIGH COURT] We find that independent enquiries were conducted by SEBI and SEBI had passed an interim order dated 08.05.2015 in the case of Pine Animation Ltd, wherein the assessee and Pine Animation Ltd together with some others, were restrained from accessing the securities market, either directly or indirectly in any manner whatsoever, till the final investigation by SEBI is completed. After completion of the final investigation, SEBI had passed a final order dated 19.09.2017 in the case of Pine Animation Ltd clearly acquitting 114 persons which admittedly included the assessee on the plea that they were not involved in artificial price rigging of shares. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries together with exit providers. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices. We find that the Hon’ble Calcutta High Court in the case of CIT vs Shreyashi Ganguli [2012 (9) TMI 1113 - CALCUTTA HIGH COURT] 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 and even the action initiated on the assessee by SEBI vide Interim order dated 08.05.2015 were finally revoked by SEBI in its final order dated 19.09.2017. In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of Pine Animation Ltd within the meaning of section 68 of the Act. The sale proceeds have been received by the assessee from the stock exchange through the SEBI registered share broker by account payee cheques through regular banking channels. We find that the three ingredients of section 68 of the Act are duly fulfilled by the assessee in the instant case. Hence there is no question of making any addition as unexplained cash credit u/s 68 of the Act in the instant case. No infirmity in the order of the ld. CIT(A) granting relief to the assessee by deleting the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 6% against the same. Accordingly, the grounds raised by the revenue are dismissed. Validity of reopening of assessment - reason to belive - huge LTCG claimed as exempt on sale of shares - HELD THAT:- Admittedly the ld. AO had indeed received information from the investigation wing unit of Mumbai that assessee had earned huge LTCG claimed as exempt on sale of shares of Pine Animation Ltd, which has been categorized as a Penny Stock by the Income Tax Department, based on the various enquiries conducted by them. These facts are also supported by searches conducted on various persons and statements recorded from various entry operators and promotes that the prices of certain scrips had been artificially rigged by certain manipulators. This information, definitely , in our considered opinion, constitutes primafacie information, which enables the ld. AO to constitute a primafacie belief that income of the assessee had escaped assessment as admittedly, the assessee had also dealt in the said scrip. Moreover, SEBI had also passed an interim order dated 08.05.2015 wherein the assessee’s name is included as one of the beneficiary and was suspended from entering the capital market in any manner whatsoever, till the completion of investigation by SEBI. In view of this, we are not inclined to accept the arguments advanced by the ld. AR challenging the validity of reopening of assessment. Hence we hold that the assessment had been validly reopened as the ld. AO had indeed primafacie material before him to form a belief that income of the assessee had escaped assessment within the meaning of section 147 - Decided against assessee.
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