TMI Blog2018 (8) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim on the basis of suspicion without any cogent material to show that the assessee has brought back his own unaccounted income in the shape of long term capital gain, the said action of the AO is not sustainable. The authorities below qua this issue and delete the addition made by the AO on this account. - Decided in favour of assessee - ITA No. 826/JP/2014 - - - Dated:- 16-7-2018 - SHRI VIJAY PAL RAO, JM AND SHRI BHAGCHAND, AM For The Assessee : Shri Rajeev Sogani and Shri Rohan Sogani (CAs) For The Revenue : Smt. Seema Meena (JCIT) ORDER PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 15th October, 2014 of ld. CIT (A) for the assessment year 2010-11. The assessee has raised the following grounds of appeal :- 1. That on the facts and in the circumstances of the case the ld. CIT (A) is wrong, unjust and has erred in law in confirming finding recorded by the assessing officer that long term capital gain of ₹ 72,61,309/- on sale of shares is not genuine allegedly on the ground that purchase of those shares is a sham transaction and thereby confirming addition to the extent of ₹ 72,61,309 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was recorded who had denied having any transaction with the assessee in respect of the shares of M/s. Well Pack Papers Containers Ltd. Accordingly, he denied the claim of long term capital gain and exemption under section 10(38) of the IT Act and made the addition of the entire sale consideration to the income of the assessee. The assessee challenged the action of the AO before the ld. CIT (A). The ld. CIT (A) upheld the addition made by the AO by treating the long term capital gain as bogus transaction. However, the ld. CIT (A) has allowed the relief on account of purchase consideration of shares already recorded in the books of account. 3. Before us, the ld. A/R of the assessee has submitted that the assessee produced all the relevant record and evidences in support of the claim and entire trail of documents substantiating the transaction of purchase and sale of shares, before the authorities below. The only requirement for claiming exemption under section 10(38) is the transaction of sale undertaken and subjected to STT in respect of shares of a company listed in the recognized Stock Exchange. The ld. A/R has submitted that the AO has not disputed that the company M/s. Wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was recorded by the AO at the back of the assessee. The AO issued notice under section 133(6) to one Shri Satyanarain Rathi but he did not appear before the AO and non appearance of the said person cannot be a basis for considering the transaction to be bogus. The AO did not take any further step for ensuring the presence of Shri Satyanarain Rathi though a confirmation was filed admitting the transaction of sale of shares to the assessee in the month of November, 2008. Thus the transaction of purchase and sale of shares was very much proved by the supporting evidences, which was not disputed by the AO. The ld. A/R has relied upon the decision of Hon ble Supreme Court in the case of CIT vs. Sunita Dhadda, 403 ITR 183 and submitted that the Hon ble Supreme Court has upheld the decision of Hon ble Jurisdictional High Court wherein the addition made by the AO on account of On Money was deleted by the Tribunal and have upheld by the Hon ble High Court was found to be proper and justified as the AO made such an addition on the basis of the statement of a witness without giving an opportunity of cross examination to the assessee. The ld. A/R has also relied upon the decision of Coordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of shares and the bills for purchase of shares mentioned only cash payment and not through banking channel. Therefore, in the absence of any evidence which can be verified independently, the said bill produced by the assessee cannot be accepted. The AO has conducted the due enquiry to verify the genuineness of the transaction. As per the report of the ITO Investigation, Indore, the share broker was not found at the given address and, therefore, when there was no existence of the share broker then the documents relied upon by the assessee as issued by the alleged share broker cannot be considered as genuine evidence. The ld. D/R has further submitted that the AO has also recorded the statement of Shri Mahesh Pancholi, the authorized person of M/s. Arihant Capital Market Ltd. The confirmation filed by the assessee clearly mentions that M/s. Arihant Securities Shares is an unit of M/s. Arihant Capital Markets Ltd., therefore, in the absence of the share broker, the AO conducted the enquiry from the parent company M/s. Arihant Capital Markets Ltd. through ITO Investigation, Indore who had denied having any transaction of sale of shares of M/s. Well Pack Papers Containers Ltd. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of 2300 shares @ ₹ 6.37 per share for ₹ 147839 (sold on 4.11.2008) Including STT and brokerage of Rs. 879/- From M/s. Arihant Securities Shares, Indore LTCG ₹ 7261309/- Thus it is clear that the assessee purchased 2300 shares of M/s. Well Pack Papers Containers Ltd. @ ₹ 6.37 per share. The assessee produced the copy of purchase bill dated 4th November, 2008 issued by M/s. Arihant Securities Shares. The total consideration for purchase of shares was paid at ₹ 1,47,839/- which included brokerage, STT etc. The assessee also produced the ledger account showing the transaction of purchase and payment to M/s. Arihant Securities Shares Ltd. Thereafter the shares were dematerialized and assessee produced the D-mat account reflecting the balance of securities of various companies including 2300 shares of M/s. Well Pack Papers Containers. We find that this is not an isolated transaction of purchase and sale of shares by the assessee but there are number of transactions in the D-mat shares of different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r :- 4.2. The Assessing Officer has not disputed the sale transaction pertaining to the above shares. It is with respect to the purchase of shares that the following facts merit consideration. ( a) Xxxxxxxx ( b) Xxxxxxxx ( c) Xxxxxxxx ( d) Xxxxxxxx ( e) The shares have been credited in the demat account of the appellant only a few days before the sale of shares through the stock exchange. Thus the sales of the shares are not in dispute as the same were sold from the d-mat account against the consideration which was received by the assessee through banking channel. The dematerialization of the shares in the d-mat account is also not in dispute hence the holding of the shares in the d-mat account by the assessee prior to the sale as well as the sale transaction are not in dispute. Once holding of the shares prior to the sale and the sale transaction itself are not in dispute then the same cannot be held as bogus transaction though may be a case of introducing unaccounted income of the assessee for depressing the purchase price of the shares. However, in the absence of any material or the fact to show that the assessee has introduced h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares to the assessee after amalgamation took place between M/s Gravity Barter Ltd. and M/s Oasis Cine Communication Ltd. and subsequent to amalgamation the assessee was allotted shares of M/s Oasis Cine Communication Ltd. on 04.02.2012. Hence, the allotment of 35,200 equity shares of M/s Oasis Cine Communication Ltd. cannot be doubted or disputed as these shares were issued post amalgamation and by a listed company. It is also not in dispute that these shares of M/s Oasis Cine Communication Ltd. were issued in exchange of the shares held by the assessee of M/s Gravity Barter Ltd. Therefore, once the shares issued by M/s Oasis Cine Communication Ltd. cannot be doubted then the holding of the shares of the M/s Gravity Barter Ltd. by the assessee correspondingly cannot be doubted because of the reasons that the shares of M/s Oasis Cine Communication Ltd. could be allotted only in exchange of shares of M/s Gravity Barter Ltd. The holding the shares of M/s Gravity Barter Ltd. and the allotment of shares M/s Oasis Cine Communication Ltd. are directly interconnected. In the absence of holding of shares M/s Gravity Barter Ltd. the shares of the M/s Oasis Cine Communication Ltd. coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to earn an extraordinary gain because of some internal information available to the assessee. 7. In case of equity shares M/s Paridhi Properties Ltd. the assessee purchase 50,000 equity share on 26.03.2011 by paying share application money of ₹ 5 lacs which is duly reflected in the bank account of the assessee as paid on 28.03.2011. Therefore, the payment of share application money has been duly established by the assessee through his bank account for allotment of shares of 50,000 equity shares of M/s Paridhi Properties Ltd. The share allotted in private placement as per of ₹ 10/- cannot be termed as penny stock. The AO doubted that the entire process of application and allotment of shares as it have been completed within a short duration of 5 days, which in the opinion of the AO is not possible in ordinary course. However, when the assessee has produced the record including the share application, payment of share application money, allotment of share then merely because of a short period of time will not be a sufficient reason to hold that the transaction is bogus. The shares allotted to the assessee vide share certificate dated 31.03.2011 were dematerialized on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch transaction of shares sold to the assessee. Even otherwise, these enquiries were conducted at Indore and the statement was recorded at the same place and rather at the back of the assessee. Therefore, until and unless these witnesses were present during the assessment proceedings, the assessee was denied the proper opportunity of cross examination. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine the witness when the witness himself was not available at the place. Accordingly, in view of the above facts and circumstances as discussed above and following the earlier decision of this Tribunal as well as various decisions relied upon by the assessee, we hold that the denial of the claim on the basis of suspicion without any cogent material to show that the assessee has brought back his own unaccounted income in the shape of long term capital gain, the said action of the AO is not sustainable. Accordingly we set aside the orders of the authorities below qua this issue and delete the addition made by the AO on this account. 4. In the result, appeal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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