TMI Blog2017 (11) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no stock rigging or manipulation. There is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. The assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and no reply was received in response to the said notice. The AO took note of similar patterns of transactions carried out by other companies which was detected by the Investigation wing and the AO examined the audited accounts of Tuni Textile Mills Ltd and found that on 25-01- 2010 there was a preferential allotment of the shares of this Company raising ₹ 7.5 crore. The AO found that the share price of the company increased from ₹ 34.50 to ₹ 269.50 i.e. there was a rise of 681% in the share price of the company and the AO also found that there was increase in share trading volume during the period. The AO found that there was a survey u/s 133A of the Act on the Company on 02.06.2015 and in the survey a deposition was taken, wherein the Managing Director of the Company Sri NP Surekha was examined; and the Sri NP Surekha stated that 47 persons were allotted preference shares on 25/01/2010 and a sum of ₹ 7.50 crore was raised by the Company. According to him, this entire deal was done by one Sri Manish Baid; and then these 47 investors used the shares allotted to them to sell the same at jacked up prices and thus they earned bogus long term capital gains from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f purchase of shares were not doubted by the AO in the year of purchase i.e AY 2010-2011. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO in ITA No. 19/Kol/2014 dated 2.12.2016 . The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. (c) The AR also stated that as the sale was made on the online platform of the stock exchange it was his submission that the assessee did not know the names of the buyers and has no connection and/or relations with any such persons. The transactions of sale of shares were online trading system through his broker from whom he received the sale consideration. The broker also receives payments for all his transactions from Stock Exchange. The seller and the buyer cannot know the names of each other as well as their respective brokers, who were involved in the trading transactions in the secondary platform. In such a situation according to ld AR, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, according to ld AR, no adverse inference could be drawn against the assessee on the basis of untested statements without allowing opportunity of cross-examination. The ld AR referred to and relied on the following judgements in support of the aforesaid submissions:- ( i) Andman Timber Industries vs. CCE [2015] 62 taxmann.com 3 (SC) ( ii) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) ( iii) ACIT vs. Amita Agarwal Others ITA No. 247/(Kol) of 2011 (Kol ITAT) ( iv) ITO vs. Bijaya Ganguly - ITA Nos. 624 625/Kol/2011 (Kol ITAT) ( v) Ganeshmull Bijay Singh Baid HUF vs. DCIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) ( vi) Rita Devi Others vs. DCIT IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) ( vii) Malti Ghanshyambhai Patadia vs. ITO - ITA No.3400/Ahd/2015 (Ahmedabad ITAT) ( viii) Pratik Suryakant Shah vs. ITO [2017] 77 taxmann.com 260 (Ahmedabad ITAT) ( ix) Sunita Jain vs. ITO - ITA No. 201 502/Ahd/2016 (Ahmedabad ITAT) ( x) Atul Kumar Khandelwal vs. DCIT ITA No. 874/Del/2016 (Delhi ITAT) ( xi) Farah Marker vs. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (g) That according to ld AR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from Long Term Capital Gains. However, the ld AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court. (i) The AR drew our attention to the decision of the Hon ble Calcutta High Court in the case of Pr CIT Vs Rungta Properties Private Limited ITAT No 105 of 2016 dated 8th May 2017 wherein it was held: ( 11) On the last point, the Tribunal held that the Assessing Officer had not brought on records any material to show that the transactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed. (k) The ld AR concluded that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., the transactions of purchase of shares were accepted by the AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- ( i) Baijnath Agarwal vs. ACIT [2010] 40 SOT 475 (Agra (TM) ( ii) ITO vs. Bibi Rani Bansal [2011] 44 SOT 500 (Agra) (TM) ( iii) ITO vs. Ashok Kumar Bansal ITA No. 289/Agra/2009 (Agra ITAT) ( iv) ACIT vs. Amita Agarwal Others ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) ( v) Rita Devi Others vs. DCIT IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) ( vi) Surya Prakash Toshniwal vs. ITO ITA No. 1213/Kol/2016 (Kol ITAT) ( vii) Sunita Jain vs. ITO ITA No. 201 502/Ahd/2016 (Ahmeda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeds of shares as unexplained cash credit under section 68 of the Act. 8. On the other hand, the Ld. DR vehemently opposed the plea of the Ld. AR and relied on the decision of the Ld CIT(A) and the AO and urged before the bench not to interfere with the order of the Ld CIT (A). 9. We have heard the rival submissions and perused the records. We note that in the present case, the appellant had purchased 13500 shares of M/s. Tuni Textile Mills Private Limited on 06.04.2011 from a stock broker in off-market transactions from M/s Badri Prasad Sons, who was a member of Calcutta Stock Exchange. These shares were held in the demat account of the assessee maintained with M/s CD Equisearch Pvt. Ltd , a member of Mumbai Stock Exchange and ultimately these shares were sold through M/s. CD Equisearch and on such sale, Security Transaction Tax was duly paid. Payments were duly received in the bank account of the assessee. We take note that the purchase of shares by off-market transactions for purchase of shares is not illegal as was held by the Coordinate Bench of this Tribunal in the case of Dolarrai Hemani vs ITO in ITA NO.19/Kol/2014 dated 02.12.2016. The transactions were all thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empower any income tax authorities to examine any person on oath, hence any such statement lacks evidentiary value and any admission made during the survey cannot by itself be made the basis of addition. We therefore hold that the statement of Shri N.P.Surekha recorded on oath during the survey proceedings cannot be the sole basis to make the impugned addition. We note that the assessee had not purchased the shares by the Preference Share Route as stated by the party before the survey party. The allotment made in preference share was on 25-01-2010, whereas the assessee purchased the shares on 06- 04-2011 through the broker . ( i.e after more than one year and three months) We find that the transactions of capital gains as claimed by the assessee was duly backed by relevant documentary evidences which include the following :- (i)The balance sheet of the assessee for the financial year 2011-12 wherein the investment made in these shares were duly recorded and reflected (page 16 of the paper book); ii) The bills of purchase of shares of M/s. Tuni Textile Mills Pvt. Ltd (page 18 of the paper book) iii)Copy of the demat statement maintained with M/s. CD Equi Sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was duly backed up by material/evidence including contract notes, demat statement, bank account reflecting transactions, the stock brokers have confirmed the transactions (pages 24-25 of the paper book), the shares having been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/evidence to prove that the assessee or any one on his behalf has rigged the stock price. It should be noted that the Stock Exchange and SEBI are the statutory authorities appointed by the Govt. of India to ensure that there is no stock rigging or manipulation. The AO has not brought any evidence on record to show that these agencies have alleged any stock manipulation against the assessee or the brokers or the company in question. In absence of any evidence to back the conclusion of AO/CIT(A), it cannot be said that merely because the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. In the aforesaid facts and circumstance, for allowing the appeal we rely on the decision of the Hon ble Calcutta High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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