TMI Blog2016 (7) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of the stock exchange are ingenuine or mere accommodation entries. CIT(A) decided issue in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT(A) has not been controverted by the department by brining any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A). - Decided against revenue - ITA No. 4861/Mum/2014, ITA No. 5168/Mum/2014 - - - Dated:- 27-5-2016 - Shri R. C. Sharma, AM And Shri Mahavir Singh, JM For the Revenue : Shri Vishwas Jadhav For the Assessee : Shri Pramod Kumar Parida Ms. Sajukta Chowdhury Miss Priya Bhalawal ORDER Per R. C. Sharma ( A. M ) These are the appeals filed by the revenue against the order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs have been lapsed, the case was reopened before 6 years Therefore the case of the appellant is validly reopened. Since this is a case wherein which the assessment is reopened beyond four years, the Assessing Officer had complied with the technical requirement of getting the approval from the JCIT. In fact, the JCIT after having gone through the material on record was satisfied and then approved the reopening. Hence, it cannot be said that the Assessing Officer did not independently applied the mind before arriving at the belief that there was an income escaped assessment. This is not a case of either change of opinion or reappraisal of existing material on record. 2.5 Various courts have held that to assume the jurisdiction u/s 147, there should be some concrete material available before the Assessing Officer and the existence of such material should be real and it should not be according to the whims and fancies of the Assessing Officer. The Assessing Officer must form an opinion that the income has escaped assessment and there must be some basis for forming such belief. The reasons recorded must have a rational connection to the formation of belief. There must be a nexus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding one that there was no escapement of income to justify the reopening of the assessment, that the amount of ₹ 3 lakhs received from the company 8 was in the nature of share application money received through banking channels and that the share applicant company had sufficient creditworthiness to advance the monies to the assessee for purchase of the shares. The Assessing Officer overruled the objections of the assessee stating that his belief that income chargeable to tax had escaped assessment was based on a report of the investigation wing which had examined meticulously the various bank accounts of the assessee and other parties besides other substantive material like recorded statements of proven entry operators. On a writ petition contending that the information contained in the material handed over to the assessee was not relevant for the purpose of forming the belief that income chargeable to tax had escaped assessment in the case of the assessee because the name of the assessee did not find a place in the statement of the director of 8 or in any other material : Held, dismissing the petition, that in the reasons recorded the Assessing Officer had referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough whom the appellant has made the said transactions and conclusively proved that Besant Periwal Co. had inflated the price of the said scrip and it was clear that Ramkrishna Fincap Limited has no networth or such price hike and the profits offered was evident of the same. As far as the contention of the appellant that he has genuinely purchased and sod the scrip Ramkrishna Fincap Limited was concerned, it was noticed that the appellant has done transaction with M/s.Besant Periwal Co. in only one transaction, i.e. 'Ramkrishna Fincap Limiited' that too in the particular period of which the SEBI has given a specific finding. The Assessing Officer has found that the appellant has not done any transaction through M/s.Basant Periwal Co. except in scrip Ramkrishna Fincap Limited. The appellant has done such transaction in the period in which the price of the scrip has been artificially inflated by M/s.Basant Periwal Co. through it only. The Assessing Officer has treated this transaction as colourable device as envisaged in the judgement of the High Court in the case of Mc.Dowell and the entire long term capital gain of ₹ 60,19,691/- was treated as unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will appreciate that the transactions of purchase and sales are genuine beyond doubt because of the following further facts: a) That there was no privy of contract between the appellant and the seller as the appellant has bought the shares on the floor of recognized stock exchange i.e. Kolkata where the said scrip is listed. Appellant do not know who is seller similarly when sold the appellant does not know to whom the shares have been sold. b) For claiming the benefit of exemption u/s. 10(38) of Act three requirement needs to be fulfilled. First the share should be held for more than 1 year, Secondly it should be listed and sold on recognized stock exchange and thirdly on the said sale necessary security transaction tax (STT) has been paid. In support of fulfillment of all ingredients please find copy of bills and ledger copy as per Ex 'E' for your honour's perusal and consideration. c) A perusal of the bills of purchase and sale your honour will appreciate that the shares have been held for more than 1 year, the same has been sold on recognized stock exchange and necessary STT has been paid to govt treasury. Hence to doubt the genuine transaction as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of voilation of bye laws by broker and fine levied on him. It is of utmost important here that M/s. Basant Periwal Co never stated before any of the authority that the transaction in M/s. Ram Krishna Fincap Ltd on the floor of Kolkata Stock Exchange are ingenuine or mere accommodation entries. Without prejudice even if they have admitted the same cannot be applied to appellant as the appellant has genuinely bought and sold these shares on the floor of Kolkata Stock exchange. On which the appellant has no control. 2.SEBI initiated investigation in respect of sell and buy dealings in the said Ramkrishna Fincap Ltd shares. 3. The investigation revealed that the transactions through M/s.Basant Periwal Co on the floor of stock exchange in this particular scrip was more than 83%. 4. SEBI initiated adjudicating proceedings against M/s.Basant Periwal Co vide show cause notice (SCN) issued and there were allegation of gross violation of the various clause of SEBI regulations and Bye laws 5. SEBI imposed fine of ₹ 3,00,000/- on M/s. Basant Periwal Co for violation of Bye laws of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Shares have been purchased, demated and sold for which necessary bills have been issued. 3. Shares have been sold through demat a/c and against the sale payment has been received by alc payee cheques etc. 4. STT shares have been sold on recognized stock exchange on which STT have been paid. When the enquiry has been made on the back of appellant without prviding any opportunity to cross examine the broker the addition made cannot be sustained as held in the decision of Kum Saumya Agrawal v ITO.(2008) 174 Taxman 60 (Agra) Mog A reading of the aforesaid decisions your honour will appreciate that appellants case is on very strong footing because the appellant has purchased these shares on floor of stock exchange, the payment against these shares have been made by a/c payee cheques the said shares have been credited in appellants demat a/c, the appellant has sold these shares after holding them for more than 1 year, on the said transaction of purchase and sales necessary STT has been paid, the broker M/s. Basant Periwal Co has never stated that these transactions are mere accommodation entries. Merely because he has voilated the bye laws of the SEBI cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demat instruction slip drawn in favour of broker who then transferred to Kolkata Stock Exchange. After transfer of shares from demat a/c of the broker M/s,.Basant Periwal CO. who received the payment from Kolkata Stock Exchange issued the in favour of the appellant. The said cheque was then deposited in appellant's bank alc. Necessary evidence of having deposited and credited the cheque in appellant's bank a/c. are also enclosed. The broker has deducted security transaction tax from sale consideration and same has been deposited with Government by the recognized stock exchange. 3.6. I have also perused broker's bills and contract notes issued by Basant Periwal Co. in support of the transactions and the source of the proceeds along with copy of the bank pass book with Vijaya Bank maintained by the appellant for the period 8.9.2004 to 16.3.2006. The above clearly shows that the sale transaction carried out by the appellant was duly disclosed to the department. The Assessing Officer did not have any material on record to show that the sale of shares were bogus. The Assessing Officer had not carried out any investigation also in this regard. Purely relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to prove the alleged sale of shares are bogus, the addition made by the Assessing Officer treating the profit on sale of shares as undisclosed income is hereby deleted. 4. In the result, the appeal is Partly Allowed 5. Similar addition made by the AO in the hands of the assessee (individual) was deleted by CIT(A) after having following observation :- 3.4 I have carefully gone through the above submissions of the appellant along with the paper book and the impugned assessment order. During the course of the assessment proceedings itself, the appellant had filed copy of bank pass book, broker's bills for' purchase' and sale of shares, contract note, demat account statement of securities transaction tax for equity etc. The above documents were furnished before me which is available in the paper book. 3.5 From the perusal of records, the facts emerged are as under:- The appellant bought 3000 share of Ramkrishna Fincap Ltd. on the floor of Kolkata Stock Exchange through a registered share broker M/s.Basant Periwal Cc. In pursuance of purchase of 'shares the bill was raised by the broker to the appellant. The appellant has paid the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aveen 'Gupta in ITA No 6'96 (Delhi) SOT 2006 94 Delhi. 3. Mayur M Shah HUF Mumbai vs ITa 25(3).ITA No.2390/Mum/2013 4. ITO v Smt Kusurnlata in ITA No. 387. 105 TTJ (2.006) 265 Jodhpur. 5. Chandrakant Babulal Shah vs ITO 16(2)(4) ITA No.6108/Mum/2009. 6. Dalpat Singh Choudhary vs ACIT (2012) 143 TTJ 500 (Jodhpur Trib). 7. ACIT v Shri Ravindra Kumar Toshnival lTA No. 5302/Mum/2008 8. Jafferall K Rallonse v DCIT Central 5 in ITA No. 68/Mum/2009 9. Mukesh R Marolia v Addl CIT 6 SOT 247 10. Mrs Hajini devi A. Chowdhary v ITO ITA No. 6455/M/07 Dated 30/04/2008 11. DCIT v Shri Pinakir L Shok in ITA No. 3030 3453/M/08 Dated 14/07/2009 In the aforesaid decisions, the' broker through whom the shares were purchased, and sold have deposed before the 'investigation wing and have given statement that these are 'mere. accommodation entry or in some cases the whereabouts of the broker' is not known even though the Hon.ITAT has held that the transaction cannot .be treated as ingenuine. Whereas in the appellant's case M/s,Basant Periwal Co: has never stated ,or there is any adverse findings that these transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT(A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT(A) at para 3 to 5 has not been controverted by the department by brining any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A). Moreover, issue is also covered by the decision of jurisdictional High Court in the case of Shyam R. Pawar (supra), wherein under similar facts and circumstances, transactions in shares were held to be genuine and addition made by AO was deleted. Respectfully following the same vis- -vis findings recorded by CIT(A) which are as per material on record, we do not find any reason to interfere in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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