TMI Blog2018 (12) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2014-15. 2. Brief facts of the case are that assessee has filed the return of income on 7.10.2014 declaring income of ₹ 13,53,740/-. Assessee claimed exemption for ₹ 9,74,605/- being long term capital gain on sale of shares. The case of the assessee was scrutinised and order u/s. 143(3) of the Act was passed on 29.12.2016 assessing the income at ₹ 23,94,830/-. Against the assessment order, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 6.4.2018 has dismissed the appeal of the assessee. Aggrieved with the order of the Ld. CIT(A), assessee appealed before the Tribunal. 3. At the time of hearing Ld. Counsel for the Assessee stated that lower authorities have wrongly made and confirmed the disallowance in dispute. He submitted that the issue involved in this appeal is squarely covered in favour of the assessee by the plethora of decisions passed by the Hon ble High Courts and ITAT wherein, similar views of lower authorities on basis of probabilities and stated investigation wing information, have been consistently overruled. Ld. counsel for the assessee also filed the Written submissions and pleaded that similar view may be app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see s income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. The Court also held the following vide Page 3 Para 5 the following: Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no question of law arises. 2. In similar case, the Hon ble Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed. 4. Hon ble Rajasthan high court in case of Pooja Aggarwal DBIT Appeal No. 385/2011 dated 11.09.2017 (which is mentioned below: 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 sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was any adverse mention about the transaction in question in statement of Sh. Pawan Purohi. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has 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. 5. THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI (SPECIAL BENCH) ITA No.5996/Mum/1993 (Assessment Year: 1984-85) M/s.GTC Industries 164 ITD Page 1 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. 7. THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [Before Hon ble Shri J.Sudhakar Reddy, AM Hon ble Shri S.S. Viswanethra Ravi, JM ] I.T.A No. 2281/Kol/2017 Assessment Year : 2014-15 Navneet Agarwal, Legal Heir of Late Kiran Agarwal [PAN: ADGPA 9851 N ] (Appellant) Date of Pronouncement : 20.07.2018 10. After careful consideration of the rival submissions, perusal of the papers on record and order of the lowers authorities below, as well as case law cited, we hold as follows. 11. The assessee in this case has stated the following facts and produced the following documents as evidences: 1. The assessee had made an application for allotment of 50000 equity shares of Smart champs IT and Infra Ltd. and she was allotted the share on 3rd December 2011 (copy of Application form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 365 days. 12.The assessing officer as well as the Ld. CIT(A) have rejected these evidences filed by the assessee by referring to Modus Operandi of persons for earning long term capital gains which his exempt from income tax. All these observations are general in nature and are applied across the board to all the 60,000 or more assessees who fall in this category. Specific evidences produced by the assesseeare not controverted by the revenue authorities. No evidence collected from third parties is confronted to the assesses. No opportunity of cross-examination of persons, on whose statements the revenue relies to make the addition, is provided to the assessee. The addition is made based on a report from the investigation wing. 13. The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... di, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected by the assessee. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in 87 ITR 349, the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. In this connection we refer to the general view on the topic of conveyance of immov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer has not brought on record any evidence to prove that the transactions entered by the assessee which are otherwise supported by proper third party documents are collusive transactions. 17. The Hon ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon ble Court held: Adverting to the various probabilities which weighed with the Income-tax Officer we may observe that the notoriety for smuggling food grains and other commodities to Bengal by country boats acquired by Sahibgunj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the appellant could not be tarred with the same brush as every arhardar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. The cancellation of the food grain licence at Nawgachia and the prosecution of the appellant under the Defence of India Rules was also of no consequence inasmuch as the appellant was acquitted of the off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing investigated by various wings of the Income Tax Department hence in our view under these circumstances nothing can be implicated against the assessssee. 18. We now consider the various propositions of law laid down by the Courts of law. That cross-examination is one part of the principles ofnatural justice has been laid down in the following judgments: a) AyaaubkhanNoorkhan Pathan vs. The State of Maharashtra and Ors. b) Andaman Timber Industries vs.Commissioner of C. Ex., Kolkata-II wherein it was held that: 19. On similar facts where the revenue has alleged that the assessee has declared bogus LTCG, it was held as follows: a) The CALCUTTAHIGH COURT inthe case of BLBCABLES CONDUCTORS[ITA No. 78 of2017] dated19.06.2018. The High Court held vide Para 4.1: b) The JAIPURITAT in the caseof VIVEKAGARWAL[ITA No.292/JP/2017]order dated 06.04.2018 held as under vide Page 9 Para 3: c)The Hon ble Punjab and Haryana High Court in the case of PREMPAL GANDHI[ITA-95-2017(O M)] dated18.01.2018 at vide Page 3 Para 4 held as under: d) The BENCH D OF KOLKATAITAT in the caseof GAUTAMPINCHA[ITA No.569/Kol/2017]order dated 15.11.2017 held as under vide Pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced at pages 13 and 14 of paper book and ultimately these shares were sold through M/s. R. L. Agarwala Capital Market Ltd. through the BSE and on such sale, Security Transaction Tax was duly paid. Payments were duly received in the bank account of the assessee. The transactions were all through a registered broker and through BSE since the scrips of M/s. Essar India Pvt. Ltd. was a listed company in BSE backed by a contract note (page 2 and 8 9 of the paper book) and shares were credited in the de-mat accounts (page 13 and 14 of the paper book) and duly reflected in the books of account. In the light of these evidences on record we are of the opinion that the purchase and sale of shares per-se cannot be held to be bad. 31. We note that the assessee has produced before the Ld. CIT(A) (i) paper relating to the application for shares, (ii) allotment of the shares, (iii) share certificates, (iv) payment by cheque, (v) necessary papers filed before the Registrar of Companies, (vi) the name of the assessee has been reflected as a shareholder, (vii) the proof of amalgamation of the companies wherein the shareholding has changed, (viii) bank statement, (ix) bank contract notes and del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he various facets of the contention of the AO, to rope in the assessee for drawing adverse inferences which remain unproved based on the evidence available on record are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the ld. AR are also not reiterated for the sake of brevity. We further find that neither the reports relied on by the AO has not been brought on record nor is there any reference of finding of such report to impute the assessee is there on record. The AO has merely carved out certain features/modus- operandi of companies indulging in practices not sanctioned by law and as mentioned in such report. However, we note that neither any investigation was carried out against the assessee nor against the brokers to whom the assessee dealt with the purchase and sale of shares in question. Thus the AO has failed to bring on record any material contained in the purported reports which are having so called adverse impact on the assessee. We further note that the company under scanner as recorded by the AO at page 4 of his order was having shareholder fund as on 31.03.2014 of ₹ 21.82 crores and was having assets worth S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and in the circumstances of the case, we hold that there was a genuine transaction of purchase and sale of shares on which assessee has earned Long Term Capital Gain, and therefore, such Long Term Capital Gain cannot be taxed u/s.68. Since Long Term Capital Gain is exempted u/s.10 (38), therefore, no addition is called for. Accordingly, appeal of the assessee is allowed. 10. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI ITA No.2021/Del/2018 Assessment Year : 2014-15 Shoubit Goel (HUF), Date of pronouncement : 25-09-2018 18. I find merit in the above argument of the ld. counsel for the assessee. It is an admitted fact that the shares were sold through national stock exchange and HDFC Securities was the broker, the amounts were received after payment of STT and brokerage and the shares were sold through banking channels. No case specific or transaction specific information was given by the persons whose statements were recorded and are the basis of addition in the instant case. 19. I find the Hon ble Punjab Haryana High Court, which is the Jurisdictional High Court in the case of the assessee, in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16.02.2017 in ITA-18-2017 titled as The Pr. Commissioner of Income Tax (Central), Ludhiana Vs Sh. Hitesh Gandhi, Bhatti Colony, Chandigarh Road, Nawanshahar. 4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 atRs. 11/- and sold the same in the assessment year 2008-2009 at ₹ 400/- per share. In the above case, namely, ITA-18-2017 also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees income from undisclosed sources. In ITA-18- 2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was mani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so in those reports and statements, the name of the assessee has not been referred to. Ld. Counsel for the assessee, therefore, rightly contended that the twin conditions of section 10(38) of the Act have been satisfied in the Page 24 ITA No.3035/Del/2018 case of the assessee. The assessee has been able to prove that she has entered into the genuine transaction of purchase and sale of shares and the sale consideration is received from broker through banking channel. The brokers have not denied the transaction with the assessee. The assessee rooted the transaction of sale of shares through recognized stock exchange after making payment of STT. In similar circumstances, ITAT SMC Bench, Delhi in the case of Meenu Goel vs ITO (supra) following the decision of Jurisdictional Hon'ble P H High Court in the case of Pr.CIT vs Prem Pal Gandhi(supra) deleted the similar addition. Therefore, the issue is covered in favour of the assessee by the order of ITAT, Delhi Bench in the case of Meenu Goel vs ITO (supra) followed by judgement 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take the place of evidence. The Hon'ble Supreme Court has stated that suspicion however strong cannot be the basis for making an addition. The evidence produced by the assessee listed above proves his case and the AO could not controvert the same by bringing on record any evidence. The evidence said to have been collected by the DIT (INV.), Kolkata and the report is not produced before this Bench. 10. I now discuss the case law on the subject. The Hon'ble Calcutta High Court in the case of CIT, Kolkata-III vs. Smt. Shreyashi Ganguli reported in [2012] (9) TMI 1113 held as follows: 1. Whether on the facts and circumstances of the case, the order of the Ld.Tribunal is perverse in law as well as on facts in deleting the addition made by the Assessing Officer as unexplained cash credit under section 68 of the Income Tax Act, 1961, by ignoring the facts on record. The ld. Tribunal after considering the material and hearing came to a fact finding which is as follows: The Assessing Officer has doubted the transaction since the selling broker was subjected to SEBI's action. However, the demat account given the statement of transactions from 01.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the Hon'ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI's action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. (iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) In this case the Hon'ble Calcutta High Court affirmed the decision of this tribunal, wherein, the tribunal allowed the appeal of the assessee where the AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the AO did not doubt the genuineness of the documents submitted by the assessee. The Tribunal held that the AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. (v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es below was not justified in rejecting the claim of the assessee that income from LTCG is exempted u/s 10(38) of the Act. For coming to such a conclusion we rely on the decision of the Hon'ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wherein the High Court held as follows : It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed. 8.5. We note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the last 7 years to rig the stock price to generate bogus capital gains that too without any evidences whatsoever. 9.2 It is also pertinent to note that the assessee and / or the stock broker M/s P Didwania Co and Toshith Securities P Ltd., both registered share and stock brokers with Calcutta Stock Exchange had confirmed the transaction and have issued legally valid contract notes under the Law and such contract notes are available in pages 41-52 of the Paper Book. We find that 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 in a similar issue dismissed the appeal of the Department by making the following observations: (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 company was executed by a broker through cross deals and the broker was suspended for some time. It is assessee's contention on the other that even though there are allegations against the broker, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble High Court at Calcutta in the case of ALPINE INVESTMENTS in ITA No. 620 of 2008 dated 26th August 2008 wherein the Hon'ble Court held as follows: It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee instruments, which were also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed. 9.4. We also find that the various other case laws of Hon'ble Jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26/ Del/2009 under similar circumstances, the case was reopened u/s 147 of the Act and the addition made by the AO was deleted by the I.T.A.T. It was further submitted that the assessee sold the shares which were earlier purchased in different years and duly shown in the balance sheet of the respective years and that the assessee had shown the sale proceeds in the books of accounts, the investments were reduced after making the sales. It was contended that there was no obligation under the law that the assessee was required to prove the source of payee. It was further contended that the AO had not rejected the books of accounts and the purchases were duly accepted so there was no reason to doubt the sales. It was submitted that the case of the assessee is squarely covered by the decision of this bench of the Tribunal in the case of ITO vs. M/s Vishal Holding and Capital Pvt. Ltd. in ITA no. 1788/Del/2009 order dated 17.07.2009 which has been upheld by the Hon'ble Jurisdictional High Court as reported in (2011) 200 Taxman 186 (Delhi). It was further, submitted that the issue is also covered by the order of the ITAT, Delhi Bench in the case of ITO vs. Goodwill Cresec Pvt. Ltd. in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained. 14. We, therefore, considering the totality of the facts do not see any valid ground to interfere with the findings of the Ld. CIT(A). Accordingly, we do not see any merit in this appeal of the department. In ITA no. 4326/Del./2009 of the assessment year 2004- 05 identical issue having similar facts is involved, the only difference is in the amount of addition which was deleted by the Ld. CIT(A). Therefore, our findings given in former part of this order, in respect of 16 4325 4326/ Del/2009 assessment year 2003-04, shall apply mutatis mutandis for assessment year 2004-05. 14. We, therefore, considering the totality of the facts do not see any valid ground to interfere with the findings of the Ld. CIT(A). Accordingly, we do not see any merit in this appeal of the department. In ITA no. 4326/Del./2009 of the assessment year 2004- 05 identical issue having similar facts is involved, the only difference is in the amount of addition which was deleted by the Ld. CIT(A). Therefore, our findings given in former part of this order, in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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