TMI Blog2018 (9) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation Wing, Kolkata wherein without giving an opportunity of cross examination is a complete violation of principles of natural justice as held by the Hon'ble Supreme Court in the case of CCE Vs Andaman Timber Industries [2005 (3) TMI 763 - SUPREME COURT]. The Coordinate Bench has also followed the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs. Pooja Agarwal [2017 (9) TMI 1104 - RAJASTHAN HIGH COURT] wherein duly considered the fact that the Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account. Therefore, in absence of any evidence, it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. Accordingly, in view of above facts and circumstances, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. Hence, this ground of revenue s appeal is dismissed. Unexplained commission expenses U/s 69C - Held that:- We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. This is a consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany controlled by them. The shares are transferred to the beneficiaries at a very nominal price in off-market transactions, sometimes through preferential allotments. The Assessing Officer has also made reference to the Securities and Exchange Board to the orders passed by the Securities and Exchange Board of India (SEBI) on the issue of manipulation of share market for providing accommodation entries to bogus long term capital gain. The shares of Kailash Auto Finance Limited, which the assessee traded, was also been put under surveillance measure by the SEBI. Thus, the Assessing Officer noted that the assessee is one of such beneficiaries who has taken the entry of ₹ 2,67,17,995/- during the assessment year 2014-15 and therefore, should not be viewed in isolation but as one of the beneficiary in the larger scheme of providing bogus long term capital gain. In response, the assessee furnished the submissions as well as relevant documentary evidence comprising of bank statement, purchase bills, merger of the company with another company and subsequently allotment of shares by merging company, order of Hon'ble High Court approving the scheme of merger, dematerialization of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired these shares as penny stocks and within the short span of time, the assessee has claimed long term capital gain of ₹ 2,60,17,995/- as against the purchase price of ₹ 7,00,000/-. Thus, the transactions itself show that there is extra ordinary and abnormal profit claimed by the assessee which is not possible in any normal transaction of purchase and sale of shares within such a short period of one year. The ld. DR has further contended that since the transaction of purchase was off-market, therefore, the assessee failed to prove the genuineness of the transaction of the purchase and the subsequent sale of the shares from the DEMAT account is nothing but was an eyewash and giving a colour of genuineness to a bogus transaction of accommodation entries. It is highly improbable to have such a huge and many fold increase in the sale price within a short period of one year. The ld DR has submitted that the Investigation Wing of Kolkata has carried out the enquiries and investigations in cases of operators of providing accommodation entries of bogus capital gain through penny stocks. The DDIT(Inv.), Kolkata recorded statements of Shri Anil Kumar Khemka, Shri Pankaj Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and submitted that in both the cases, the payment was made through the bank account at the time of purchase of these shares, therefore, when the assessee has produced purchase bills alongwith the bank statement of the assessee showing the payment of purchase consideration through bank then the transactions of purchase cannot be doubted. Subsequently in pursuant to the scheme of amalgamation sanctioned by the Hon ble Allahabad High Court and Hon ble Bombay High Court on 09 10/05/2013, these two companies were amalgamated in the company M/s Kailash Auto Finance Limited the assessee was allotted 7 lacs shares of M/s Kailash Auto Finance Ltd. in lieu of total shares held by the assessee in Careful Project Advisory Ltd. and Panchshul Marketing Ltd. The ld AR has thus submitted that the assessee has shows these investments in the balance sheet as on 31/3/2012 as well as 31/3/2013 respectively and thereafter when the assessee was allotted shares of equal numbers in the amalgamated company which is listed in the stock exchange. These shares were duly dematerialized as per DEMAT account, details placed at page Nos. 12 to 69 of the paper book. Hence, the holding of shares by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh registered stock broker Raghunandan Capital Pvt. Ltd. The Broker M/s Raghunandan Capital Pvt. Ltd. is a registered broker having Broker Member ID: 6112. The brokers while selling, had also charged STT ₹ 26,745.75/-. The entire sale proceeds of ₹ 2,67,45,750/- on account of both the sale transactions, were received through cheque and duly found credited in the bank account of the assessee. Both the transactions of sale and purchase were also duly evidenced by the D-Mat Account of the assessee which shows the fact of purchasing and selling of the shares, delivery of shares was taken given. It is submitted that the assessee has been in the field of the financial market and financial products with an extensive experience of more than 15 years. He was having in-depth knowledge, strong understanding of the various intricacies of the financial market. The assessee has been holding the position of director in various companies namely Raghunandan Industries P. Ltd, Raghunandan Capital P. Ltd., Raghunandan Insurance Broker P. Ltd, R Money Wealth Advisors P. Ltd., which are in the field of financial consultancy services. Raghunandan Capital (RCPL) is a broking entity and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically submitted that in the absence of cross examination of the key persons no adverse inference can be drawn. But still, the AO, in its rebuttal pg. 14 Para 9, completely ignored such a request for opportunity of cross examination and aspect of providing the material (relied and used) to the assessee. It is submitted that AO has heavily relied upon the orders of the SEBI and in particular passed on dated 29.03.2016 (Pg. 8 Para 4 onward Pr. 12) whereby some adverse finding given by the SEBI has been relied upon. Pertinently however, the SEBI vide its order dated 21.09.2017 (PB- 367- 381) has revoked the suspension order. The ld AR has relied on the following case laws: (i) Andaman Timber Industries vs CIT (2015) 127 DTR 241(SC), (ii) Meghraj Singh Shekhawat vs. DCIT in ITA No. 444??/JP/17 vide order dated 7th March, 2018 (iii) Sh. Pramod Kumar Lodha Vs ITO in ITA No. 826/JP/2014 order dated 16/07/2017 (iv) CIT vs. Smt. Puja Agrawal in DBIT No. 385/2011 dated 11.09.2017 6. We have heard the rival submissions as well the relevant material on record. The assessee stated to have purchased three lacs shares of Careful Projects Advisory Ltd. for a consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n either of the assessee or M/s Sanskriti Vincom Pvt. Ltd. through whom the assessee purchased these shares. Thus, even if three persons are considered to have indulged in the transaction of providing accommodation entries, it would not automatically lead to the conclusion that each and every transaction in purchase and sale of shares of those companies are bogus transactions, which were between the some other parties not connected with those operators. Even otherwise in the case in hand, the assessee did not purchase the shares of M/s Kailash Auto Finance Ltd. but the assessee purchased the shares of Careful Projects Advisory Ltd. and M/s Panchshul Marketing Ltd.. These two companies were subsequently amalgamated with M/s Kailash Auto Finance Ltd. in pursuant to the scheme of amalgamation approved by the Hon ble Allahabad High Court as well as the Hon ble Bombay High Court vide their respective decisions dated 09th 10th May, 2013. Consequently, the assessee was allotted equal number of shares of the amalgamated entries of M/s Kailash Auto Finance Limited in lieu of the shares held by the assessee in erstwhile two companies namely Careful Projects Advisory Ltd. and Panchshul Mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on the basis of the statements recorded by the Investigation Wing, Kolkata, however, even if those statements are considered and taken into account, it cannot lead to the conclusion or establish the fact that the assessee was part of the said racket of providing accommodation entries of bogus capital gain. The ld. CIT(A) while considering all these facts, have decided the issue in para 5.4 and 5.5 as under: 5.4 I have considered the above mentioned facts of the case. It is my considered view that the assessee needs to maintain and produce following documents/evidence to prove the genuineness of the share transaction. To conclude assessee need to maintain the following documents in order to prove genuineness of the investments:- Basic documents Source of the investments made. Business activity of the investor. Contract note for purchase of investment made and sale of investment. Bank statement reflecting payment and receipt of sale of investments. Demat statement to prove delivery of shares. Ledger copy of share broker a/c. Copy of ledger a/c of source of investment. Additional Documents/inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. In view of the same the Appellant thought it fit and presumed it to be a good investment opportunity and decided to purchase shares of CPAL. Accordingly in March, 2012, the Appellant purchased 300000 shares of CPAL at the price of ₹ 1 per share for a total consideration of ₹ 3,00,000/-. 3. Further in May 2012 the Appellant came to know that CPAL and one Panchshul Marketing Ltd. ( PML ) had purchased in Kailash Auto Finance Ltd. ( KAL ) and once the company is acquired by the PML and CPAL they would infuse fresh capital in KAL and they would be revamping the business drastically. Accordingly in July 2012 , Our Client again approached Sanskriti Vincom Private Limited and purchased 400000 shares of PML at the price of ₹ 1 per share for a total consideration of ₹ 4,00,000/-. 4. Following the amalgamation of CPAL and PML with Kailash Auto Finance Ltd. pursuant to the Scheme of Amalgamation sanctioned by the Hon ble Allahabad High Court and the Hon ble Bombay High Court on 9th and 10th May 2013 respectively, and on July 22, 2013 the Appellant was allotted 7,00,000 shares of Kailash Auto Finance Ltd. for the 3.00.000 and 4.00,000 shares hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in the case of Mukesh R. Marolia wherein it has been held that off market transaction is not a unlawful activity and there is no relevance in seeking details of share transaction from stock exchange when the sale was not on stock exchange and relying upon it for making addition. Further, sale of such shares have neither been disputed nor any evidence are on record which shows them as sham transaction. A.O s casting doubt on the appellant s credential as director in M/s Raghunandan Capital Pvt. Ltd, which is the broker company through which the shares were sold is not tenable in the eyes of the law as the appellant is a separate entity and is well qualified also to take decisions on his own. Further, the A.O has failed to bring on record any wrong doings on the part of the broker company in the transaction. Therefore, on factual matrix of the case, I failed to find any discrepancy right from the purchase of shares and till its eventual sale. I have also taken into account Hon ble Rajasthan High Court Judgment at Jodhpur in case of CIT Vs. Smt Sumitra Devi in ITA 54/2012 has held that:- True it is that several suspicious circumstances were indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e denied as bogus and not genuine. 5.5 Therefore, taking into account all factual matrix, judicial rulings including jurisdictional Rajasthan High Court judgments, it is my considered view that the appellant in this case has reasonably discharged its onus by providing all necessary details/evidences and the A.O has not been able to bring on record any credible evidences (except 3 rd part statements but the assessee has not been given proper opportunity to cross examine such persons who has given statement) to disprove the appellant s contention and claims. In view of the foregone, it is my considered view that the share transaction by the appellant involving KAFL shares cannot be treated as sham and not genuine. Accordingly, the share transaction resulting in capital gains of ₹ 2,60,17,995/- as valid transaction and subjected to the provisions of section 10(38) of the Act. Accordingly the addition of ₹ 2,60,17,995/- u/s 68 of the Act is deleted. Appellant s ground of appeal on this issue is allowed. We further note that this Tribunal has also considered the similar issue in the case of Shri Pramod Jain Vs DCIT (supra) and Shri Meghraj Singh Shekhawat Vs DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns with the companies as mentioned below: 1. First Financial Services Ltd. (FFSL) 2. Splash Media and Infra Ltd. ( SPMIL) 3. D B (International) stock Brokers Ltd. ( DBSBL) 4. Unisys Softwares Holdings Industries Ltd. (USHL) 5. Fact Enterprises Ltd. ( FEL) 6. Parikh Herbal Ltd. ( now Safal Herbs Ltd) 7. Premier Capital Service 8. Rutron Internationa Ltd. 9. Radford Global Ltd 10. JMD Telefilms Industries Ltd 11. Dhanleela Investments Trading Co. Ltd. 12. SRK Industries Ltd. 13. Dhenu Buildcon Infra ltd. Ans. M/s Comfort Securities Ltd. has business nexus with the following companies Name of the Company Nature of Business Transaction 1. First Financial Services Ltd. Brokerage and Consultancy Services 2. Splash Media and Infra Ltd. Brokerage, Share Holding and Consultancy Services 3. Fact Enterprises Ltd Broking as well as share holding 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cannot be considered as a penny stock transactions. The assessee has produced the D-mat account and therefore, as on 18.06.2012 the assessee was holding 3,50,000 equity shares of M/s Rutron International Ltd. in D-mat account. This fact of holding the shares in the D-mat account as on 18.06.2012 cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee, therefore, once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Shri Anil Agrawal recorded by the Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 which is evident from the bank account of the assessee at page 40 of the paper book. In the mean time the said M/s Gravity Barter Pvt. Ltd. changed its status from private limited to a public limited and fresh certificate was issued by the Registrar of company on 05.02.2011 which is placed at page 43 of the paper book. Therefore, there is no reason to disbelief the fact of fresh certificate issued by the Registrar of companies on 05.02.2011 and hence, the date mentioned in the order of the Hon ble Kolkata High Court as 18.04.2011 appears to be typographical mistake. Even otherwise these two dates do not have any effect on the genuineness of the transactions of purchase of equity shares by the assessee of M/s Gravity Barter Pvt. Ltd. The assessee though produced all the relevant records and evidences right from the purchase bills, certificate issued by the Registrar about the change of name, the communication between the assessee and the seller of the shares and thereafter, the amalgamation of M/s Gravity Barter Ltd. with M/s Oasis Cine Communication Ltd. which was duly approved by the Hon ble High Court vide order dated 28.8.2011. The assessee in the mean time got the physical sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of genuineness of the transaction does not arise however, the purchase consideration can be doubted by the AO if the shares were claimed to have been purchased against consideration paid in cash which is not in case of the assessee. The assessee has paid purchase consideration through cheque and therefore, even if the said consideration is found to be very less in comparison to the sale price at the time of sale of shares in the absence of any material or other facts detected or brought on record by the AO that the assessee has brought back his own unaccounted money in the shape of long term capital gain and has used the same as a device to avoid tax, the purchase consideration paid by the assessee cannot be doubted in the absence of any corroborating evidence. The Assessing Officer has not disputed that the fair market value of the shares of M/s Gravity Barter Ltd. was more than the purchase price claimed by the assessee. It may be a case that ensuring merger/amalgamation of the said company with M/s Oasis Cine Communication Ltd. the assessee might have anticipant the exceptional appreciation in the share price due to extraordinary event of merger/ amalgamation. However, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Luminaire Technologies Ltd. The evidence produced by the assessee leave no scope of any doubt about the holding of the shares by the assessee. 8. As regards the purchase consideration when the assessee has shown the share application money paid through his bank account and the AO has not brought on record any material to show that apart from the share application money paid through bank account the assessee has brought his own unaccounted money back as long term capital gain. It is also pertinent to note that the shares of M/s Oasis Cine Communication Ltd. are still held by the assessee in its demat account to the extent of 17,200 shares and therefore, the holding of the shares by any parameter or stretch of imagination cannot be doubted. The AO has passed the assessment year based on the statement of Shri Deepak Patwari recorded by the Investigation Wing of Kolkata however, the assessee has specifically demanded the cross examination of Shri Deepak Patwari vide letter dated 15.03.2016 specifically in paras 3 and 4 as reproduced by the AO at page No. 7 of the assessment order as under:- 3. Since, the shares were allotted by the company through private placement af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee to produce the principal Officers of those companies. As regards the non grant of opportunity to cross examine, the Hon ble Supreme Court in case of Andaman Timber Industries vs. CCE (supra) while dealing with the issue has held in para 5 to 8 as under: 5. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by the AO on the basis of suspicion and surmises and observed in par 46 as under:- 46. In situations like this case, one may fall into realm of 'preponderance of probability' where there are many probable factors, some in favour of the assessee and some may go against the assessee. But the probable factors have to be weighed on material facts so collected. Here in this case the material facts strongly indicate a probability that the wholesale buyers had collected the premium money for spending it on advertisement and other expenses and it was their liability as per their mutual understanding with the assessee. Another very strong probable factor is that the entire scheme of 'twin branding' and collection of premium was so designed that assesseecompany need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that Assessee-Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT vs. Smt. Pooja Agrawal (supra) has upheld the finding of the Tribunal on this issue in para 12 as under:- 12. However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:- Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce Ind. Ltd., assessee's account with P.K. Agarwal co. share broker, company's master details from registrar of companies, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA- 385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant. In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas in the case of the assessee the shares were allotted to the assessee by the company at par of face value. Hence, in view of the facts and circumstances when we hold that the order of the Assessing Officer treating the long term capital gain as bogus and consequential addition made to the total income of the assessee is not sustainable. Hence, we delete the addition made by the AO on this account. Therefore, on analyzing of the facts as well as the evidence produced by the assessee, we find that the Assessing Officer has not brought any material on record to controvert the fact duly established by the supporting evidence of purchase bills, payment of consideration through bank, dematerialization of shares in the DEMAT account, allotment of the shares amalgamated new entity in lieu of the earlier two companies of equal number of shares. Sale of shares from the DEMAT account through stock exchange and at the prevailing price as on the date of sale and further payment of STT on the transaction of sale has been duly established. In absence of any contrary fact, the mere reliance by the Assessing Officer on the report of Investigation Wing, Kolkata is not sufficient to establ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
