TMI Blog2018 (6) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... of Jurisdictional P&H High Court which is binding. There is no other material available on record to rebut the claim of the assessee of exemption claimed u/s 10(38) of the Act. - Decided in favour of assessee. - ITA No.3035/Del/2018 - - - Dated:- 27-6-2018 - SH. BHAVNESH SAINI, JUDICIAL MEMBER For The Appellant : Sh. Gautam Jain And Sh. Peeyush Kamal, Advocate For The Respondent : Sh. S.L.Anuragi, Sr.DR ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER This appeal by the assessee has been directed against the order of Ld.CIT(A)- 1, Gurgaon dated 09.03.2018 for AY 2014-15 on the following grounds:- 1. That the learned Commissioner of Income Tax (Appeals) 1, Gurgaon has further grossly erred both in law and, on facts in denying the claim of exemption of long term capital gain of ₹ 19,39,357/- on sale of shares sold on recognized stock exchange and, eligible for exemption u/s 10(38) of the Act and bringing to tax as unexplained credit u/s 68 of the Act. 2. That learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in making an addition of ₹ 19,51,357/- being sale consideration on sale of shares listed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals) that the appellant did not divulge the name of the person who advised her to buy the shares of MIs. Turbo Tech Engineering Ltd. and appellant did not have basic knowledge of share trading are irrelevant considerations either to bring to tax long term capital gain under section 68 of the Act or deny claim of exemption under section 10(38) of the Act and therefore, the addition made and confirmed is invalid. 2.8 That various adverse findings and conclusions recorded by the learned Commissioner of Income Tax (Appeals) are factually incorrect and contrary to record, legally misconceived and untenable. 2.9 That the learned Commissioner of Income Tax (Appeals) has erred in concluding without any basis that assessee has introduced his unaccounted income in the form of long term capital gain by manipulating the penny stock. 3 That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in not allowing depreciation of cost incurred on purchase of shares and sold by the appellant in the next year. It is therefore, prayed that it be held that exemption denied and addition made and sustained by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares were got transferred in her name 28.11.2011. Later on out of these 6000 shares were sold on 30.07.2013 and 31.07.2013 (500+5500=6000) through the broker M/s Indus Portfolio Pvt. Ltd, for a total sale consideration of ₹ 19,53,372/-. 8.2. On going through the information made available prima facie it is found that the assessee indulged in bogus Long Term Capital Gain and claimed the above amount as exempt u/s. 10(38) of the Act, 1961. It is also found that the above scrip M/s. Turbo Tech Pvt. Limited, which the assessee purchased, was involved in providing bogus accommodation entries in the shape of bogus Long Term Capital Gains. 3.1. All these facts were brought to the notice of the assessee by the Assessing Officer in the show cause dated 19/12/2016 and the appellant was asked to explain why transactions may not be held to be accommodation entry. The Assessing Officer also referred to the Investigation conducted by the Investigation Wing Kolkata and particularly referred to the statements of Sh.Anil Kumar Khemka recorded u/s 131 of the Act wherein it was stated by these persons that M/s Turbo Tech Ltd was used for the purpose of providing accommodation entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove that either there was no such scheme and even if there was one, the benefit to the assessee was as a result of genuine transaction. The assessee has miserably failed to discharge this onus and therefore, the only inescapable conclusion is that like thousand other individuals the assessee has also taken entry of bogus LTCG by paying unaccounted income. 10.1. It is true that in cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year; the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. To reiterate, the burden of proof, cast upon the assessee to prove that the claim of long term capital gain as exempt u/s 10(38), is not discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t confronted to the appellant, appellant was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to our case. 3. Statements of four persons incorporated by the Ld. AO in assessment order are incomplete. Ld. AO has incorporated only a part of statement in the assessment order according to his choice, which is again against the basic principles of law. 4. Ld. AD has also enclosed copy of some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the order which is not very legible, seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and sold them in year 2013. It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. 5. Documents incorporated by the Ld. AD in the assessment order at Page 20 to 22 are not at all legible. Therefore appellant is not in a position to comment on these documents. 6. Ld. AO has raised objection regarding the cash purchase of shares and that sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Agrawal 328 ITR 656 (Bom) Ashish International, ITA No. 4299 of 2009 (Bombay High Court) Farrah Marker, ITAT Mumbai Bench in ITA No. 3801/Mum/2011 Sunil Prakash, ITAT Mumbai Bench in ITA No. 6494/Mum/2014 Pardeep Kumar Aggarwal 159 ITD 54 (Chandigarh) Sri Dolarrai Hemani, ITAT Kolkata Bench in ITA No. 19/Kol/2014 Indravadan Jain HUF, ITAT Mumbai Bench in ITA No. 4861/Mum/2014 Kamla Devi S Doshi, ITAT Mumbai Bench in ITA No. 1957/Mum/2015 Surya Prakash Toshniwal, ITAT Kolkata Bench in ITA No. 1213/Kol/2016 Sunita Jain, ITAT Ahmedabad Bench in ITA No. 501 502/Ahd/2016 Pratik Suryakant Shah, 77 taxmann.com 260 (Ahmedabad-Trib) Copy of all these judgements are enclosed herewith. 12. Ld. AD also erred in' making addition u/s 68 of the Act, although the impugned addition should not be made under this section. As per the requirement of law, appellant need not to maintain any books of accounts and in absence of books of accounts, no addition could be made U/S 68 of the Act. 13. That the GOA No.5 is regarding issuance of notice u/s 143(2), which was issued by the ITO, Ward-27(4), New Delhi. ITO, Ward-27(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities whatsoever. ( viii) The buyer himself is normally unaware of the financial performance of the company in which he has invested. ( ix) The shares are purchased at lower rates and sold at higher rates through the series of off-market transactions created by the broker with vested interest. The share prices are artificially rigged through off market transactions. This hike is not supported by the fundamentals of the company. 3.6 To fully appreciate the issue at hand it is relevant to take notice of these commonly known notorious facts about the modus operandi of converting the unaccounted funds through willing dubious entities. Reference in this regard can also be made to the following decisions:- ( a) CWT v, Rohtas Industries Limited, 67 ITR 283 (SC), wherein it was held that- In the absence of any direct evidence, a judicial or quasijudicial Tribunal can base its conclusions on the basis of what are known as notorious facts bearing in mind the principles of Section 144 of the Evidence Act. ( b) Attar Singh Gurmukh Singh v. ITD, 191 ITR 667 (SC), wherein, while interpreting the provisions of Section 40A(3), it was held that- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the purchase bill i.e. order No., Trade No., and Trade Time are left Blank. vi) No Proof/source of payment for purchase of these shares was brought on record. The payment was claimed to have been made in cash. vii) The purchase of the shares cannot be verified from the Calcutta Stock Exchange since the vital colums in the said broker bill such as Order No, Trade No. Trade Time was left blank. 3.9 As per appellant's own version, the shares were purchased M/s Shree Ji Broking Pvt Ltd on 22.11.2011 directly in cash and not through recognized stock exchange. Moreover, as per the documents on record the shares were purchased in the name of appellant on 22.11.2011 whereas the payment of the same as made only on 24.11.2011. Thus as per the facts on record the shares were purchased in the name of the appellant even before the payment was made. Further, from all the aforesaid facts, it is evident that the meager investment of ₹ 6,000 made by the appellant on 22.11.2011 went up to more than ₹ 19 lakhs within a period of 24 months. Such a steep rise in value of investment is not within the realm of human probability. In these circumstances, it is evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability. I agree with this observation of the Assessing Officer. These types of companies function in the capital market whose sale price is manipulated to astronomical height only to create the artificial transaction in the form of capital gain. Surrounding circumstances differ from the normal share market transactions in which they are ordinarily carried out. Taking all the steps together, final conclusion does not accord with the human probabilities. The Hon'ble Supreme Court in the case of CIT v. Durga Prasad More 82 ITR 540 held as under: It is a story that does not accord with human probabilities. It is strange that High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbehevable as the Tribunal has found and in our opinion, rightly that the decisions remains that the consideration for the sale proceeded from the assessee and therefore, it must be assumed to be his money. 3.13 Generally, it is expected that apparent is real but it is not sacrosanct. If facts and circumstances so warrant that it does not accord with the test of human probabilities, transactions have been held to be non-genuine. It is highly i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - allowed by the AO as deduction may not be added to the total income and the income may not be enhanced accordingly. No reply has been filed by the appellant. 3.17 With regard to the facts of this issue it is evident that the appellant has received ₹ 19,51,357/- as accommodation entry during the year. Any expenditure claimed to have been incurred in the earlier years is therefore not genuine and cannot be claimed and allowed as expenditure during the current year. The addition made by AO is accordingly enhanced to ₹ 19,51,357/-. 3.18. In the result the appeal of the appellant is dismissed with enhancement as above. 6. Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that an inquiry conducted in the cases of other assessees and statements referred to by the AO in the assessment order have not been confronted to the assessee. The assessee has not been named by any of these persons for indulging in taking accommodation entries. He has, therefore, submitted that such evidence cannot be read in evidence against the assessee and relied upon the decision of the Hon ble Supreme Court in the case of Kishan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough account payee cheque / banking channel and assessee had purchased share in financial year 2009-10 and sold the same in the financial year 2013-14 resulting in Long Term Capital Gain. The assessee has submitted various documentary evidences to prove the genuineness of the transaction of sale and purchase of shares which includes a copy of purchase bill dated 22.02.2010; a copy of share transfer form in the favour of the assessee; Copy of bank statement highlighting the payment made against the share purchased; Transaction statement of the stock broker i.e. Pace Stock Broking Services (P) Ltd., account; copy of bank statement in which sale proceed from the sale of shares received; copy of calculation of long term capital gain, which was not faulted by the AO. However, the lower authorities have not considered the aforesaid documents and rejected all the claims made by the assessee by relying on the report of the Investigation Wing and thereby made the addition, which is not sustainable in the eyes of law. I further find that the AO has given detailed explanation in the order regarding the modus operandi of bogus LTCG scheme but failed to substantiate how the assessee fell in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of ₹ 4,11,77,474/- made by the AO on account of sham share transactions, whereas the CIT(A) himself had held that the assessee had not been able to substantiate the source of investment of ₹ 11,00,000/- in the said shares purchased during the financial year 2005-06 and the AO was directed to reopen the case of the assessee for the assessment year 2006-07 on this issue? ( iii) Whether the Hon ble ITAT has erred in ignoring an important aspect that in such cases of sham transactions of shares showing abnormal hike in their value, where the facts themselves speak loud and clear, the AO is justified to even draw an inference from the attendant circumstances? ( iv) Whether on the facts and in the circumstances of the case, the Hon ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A) deleting the addition of ₹ 12,59,000/- made by the AO on the basis of seized document on the grounds that the AO has not pointed out as to how the figures of ₹ 12.59 lacs has been worked out ignoring the fact that the assessee himself in his r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition amounting ₹ 18,46,600/- made by the AO and confirmed by the Ld. CIT(A) is hereby deleted and ground raised by the assessee is allowed. 8. In the result, the appeal of the assessee is allowed. 6.1. He has, therefore, submitted that the issue is covered in favour of the assessee by above decision. The assessee entered into genuine transaction, therefore, no addition u/s 68 of the Act be made against the assessee. 7. On the other hand, Ld. Sr. DR relied upon the orders of the authorities below. 8. I have heard the rival submissions and perused the material available on record. The assessee placed sufficient documentary evidences before the AO which are copy of the shares certificates with transfer form, copy of debit note issued by Shreeji Broking (P) Ltd., copy of cash receipt of Shreeji Broking (P) Ltd., copy of the account statement of the assessee in the books of the broker, copy of ledger account of Indus Portfolio (P) Ltd., copy of evidence for payment of securities transaction tax and copy of the bank statement of the assessee to show that the assessee had entered into genuine transaction of purchase of share which were later on sold through the b ..... 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