TMI Blog2019 (1) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the present case. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. - Decided in favour of assessee. - ITA No.3381/Del/2017 - - - Dated:- 15-1-2019 - SH. R.K. PAND, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh.Sanjay Kumar, CA And Sh. Akash Garg, Advocate For The Respondent : Sh.S. S. Rana, CIT (DR) ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 20.03.2017 passed by the CIT (A), Muzaffarnagar relating to A. Y. 2013-14. 2. Facts of the case, in brief, are that the assessee is an individual and engaged in saraffa business i.e. sale and purchase of gold and silver jewellery and bullion etc since last many years under name and style of M/s. S. K. Jewellers at Saraffa Bazar, Saharanpur. He filed his return of income on 05.09.2013 declaring total income at ₹ 9,85,280/-. During the course assessment proceedings the Assessing Officer observed from the balance sheet of the assessee that the assesesee has introduced capital of approximately 2.40 crores out of which 2,36,97,101 was received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange could be done staring only from 28/12/2011. He found that the price of the scrip kept rising throughout the period when the shares were locked up for trading and further for next 3 months when it touched heights of approx. ₹ 125 each, i.e. a humongous rise of over 25000% over a very short period of just 14-15 months. These facts according to the Assessing Officer demanded a deeper study of the price movements and share market behaviour of the entities involved in trade and of the scrip as the share price movements and the profit earned by the beneficiaries were beyond human probabilities. He, therefore, conducted a deeper study as to whether the transactions were genuine investment transactions or sham ones and colourable device only to convert the unaccounted cash into tax exempt income and to ascertain as to whether the apparent was real. 5. The Assessing Officer during the course of assessment proceeding made elaborate enquiries about the history of the company namely M/s. Kyra Landscapes Limited as culled from money control site and observed that the very nature of the business of the company is dubious. It started as a chemical company and later on entered into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was created to jack up the scrip price. 7. He, therefore, was the opinion that price rigging was done to increase the scrip price significantly. The Assessing Officer obtained the data pertaining to this scrip from BSE and analysed the data so received and found that there were very limited persons dealing in shares of the company and many of them were involved in both buying and selling the same during this non-stop circuit shy upward movement. The broking firms involved were also limited and some of them were prima facie involved with their clients in this practice. These parties and the broking firms have been found to be involved in such practices by the SEBI on many previous occasions. He, therefore, held that the movement was meticulously planned and created and not genuine. 8. The Assessing Officer analysed the data pertaining to the entities involved in the trade of the scrip during the aforementioned periods and found that those entities, who were allotted shares on preferential basis in December, 2010, exited from the scrip fully (or were in the process of full exit) starting from Feb-Mar, 2012 i.e. one year after they purchased the shares thereby making them eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated by SEBI Stock Exchange right from the determination of price to the allotments made by the listed company. The shares so allotted on 24.12.2010 were under lock-in for a period for one year and the same were sold on various dates from 05.03.2012 to 25.10.2012 for a price ranging from ₹ 98/- to ₹ 160/- through online trading and payment for the sale price after deducting Security Transaction Tax (S. T. T.), brokerage and other incidental charges was received in his regular and registered bank account with the depository on various dates. The rates at which shares have been sold are in conformity with the rates prevalent at the stock exchange, which is within the purview of SEBI. It was submitted that SEBI and depository are the witness of the prices on which shares in question had been sold and the assessee, in his return, declared such LTCG and claimed exemption u/s 10 (38) by filing the return voluntarily u/s 139 (1) on 05.09.2013. 12. However, the Assessing Officer was not satisfied with the explanation given by the assessee and observed that what is apparent in this case is not real. The relevant observation of the Assessing Officer at para 3.8.4 of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore credit in the books of a partnership firm was held not to partake the nature of credit in the books of a partner in his capacity of individual assessee and is therefore not applicable in the present case. 4. Thus in view of the elaborate discussion made above, I hereby hold the amount of ₹ 2,36,97,101/- introduced/ credited by the assessee out of these purported share sale receipts during the financial year 2012-13 (A.Y.2013-14) in his capital account as his income being unexplained cash credit u/s68 of the Income Tax Act (taxable at the rate of 30% as provided u/s115BBE. 14. The assessee made elaborate submission before the CIT(A). However, the Ld. CIT (A) also was not satisfied with the arguments advanced by the assessee and upheld the action of the Assessing Officer by observing as under :- 9. The facts of the case as well as submission made by the appellant have been gone through. The appellant has shown addition of ₹ 23697101/- in the capital account. It was explained to have received on account of long term capital gain from sale of shares and claimed the same as exempt u/s 10(38) of the Act. The appellant has purchased 2 lac equity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Unit at Thane to examine the other buyers of TCL Technologies and it has been found that some of such purchasing persons were not found existing at the given addresses or in some other cases did not make any compliance. All such transactions of purchase have been found in the nature of providing accommodations to benefit the preferential share holders. The AO has recorded the statement of the appellant and has found many discrepancies in the same for these transactions. The AO has confronted the above adverse findings to the appellant on 28- 03-2016. The AO has thus reached to the conclusion that the amount of ₹ 23697101/- represents unexplained cash credit and taxed the same u/s 68 of the Act. The AO has relied upon the decision of the Hon ble ITAT, Delhi in the case Harish Win Chaddha vs. DCIT ITA No.3088, 3098, 3017/Del/2.005, Hon ble Apex Court in the case of Sumati Dayal vs. CIT 214 ITR 801 (SC), Durga Prasad vs. CIT, Me Dowell vs. CTO, CIT vs. Mohan Kalan. The AR during the appellate proceedings has stated that the shares have been sold through the stock exchange by making payment of Security Transaction Tax. The AR has relied upon the payments made through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has entered into a sham transaction by introducing credit in its books of account in the garb of bogus long term capital gain(claimed as exempt). The adverse findings have been confronted by the AO to the appellant during the assessment proceedings. In this case it is noted that keeping in view the surrounding circumstances and by applying the test human probabilities, there are reasons to believe that the apparent is not real in this case. Reliance is placed on the decision of the Hon ble Supreme Court in the CIT vs. Durga Prasad 82 ITR 540 (SC). The onus was on the appellant to explain the sum found credited in its books of account with satisfactory documentary evidence. The appellant has not discharged the onus cast upon him in this regard. The AO has shifted the onus on the appellant by confronting the adverse findings. The AO has noted in Para 3.8.10 of the assessment order that the sum has been credited by the appellant in the Capital Account for the relevant accounting period and therefore, it is part of books of account maintained by the appellant. Under the facts it is held that the AO was justified to make addition of ₹ 2,36,97,101/- on account of unexp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct verifiable by the quotation at Stock Exchange; d) the transaction was in purview of SEBI the market regulator; and e) the movement of shares was through demat account; should have held that provisions of section 68 were not applicable in the instant case and the addition made by the Assessing Officer was wholly illegal and unjustified. 6. BECAUSE, adverse inference in the matter c: realization of sale proceeds was based on extraneous information and statements as referred to in the orders passed by the authorities below and such information could not have constituted material for the purposes of assessment of consideration amounting to ₹ 2,36,97,101/- realised on sale of shares in TCL Technologies Ltd (name changed to Kayra Landscape Ltd.) and to treat the same as taxable in he hands of the appellant. - '7 BECAUSE the consideration (gross) aggregating ₹ 2,37,99,223/- realised on sale of shares that had been held by the appellant as Long Term Capital Asset (in the form of shares) was subjected to recoveries mad ? by the registered broker, which included Security Transaction Tax (STT) as payable to SEBI the market regulator with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and other incidental charges were received in his bank account which was duly confirmed by the broker in the statement recorded by the AO. He submitted that no discrepancy whatsoever in any of the documents furnished by the assessee right from the purchase of shares to sale of shares has been pointed out by the Assessing Officer. Referring to the Q.No. 5 and its answer in the statement of the assessee as reproduced at page 40 of assessment order he submitted that in the present case investment in the preferential issue of shares of TCL Technologies Ltd., a listed company, was made by the assessee on the advice of his close relative namely Sh. Sripal Jain in F.Y. 2010- 11 for which payment was made through his regular bank account with Shivalik Mercantile Co-operative Bank on 21.12.2010 out of funds available with the assessee. Consequently, shares were allotted to the assessee on 29.12.2010 and credited to his demat account with Global Capital Market Ltd. Thus, acquisition and holding of shares by the assessee is beyond any doubt. Referring to paper book pages 190 and 191 he submitted that notice U/s 131 was issued and statement of Sh. Sachin Jain as franchise of M/s Globe Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged and the Assessing Officer and the CIT(A) could not have termed his explanation as unsatisfactory. 15.3 The Ld. counsel for the assessee also relied on the following decisions:- 1. CIT Vs. Mukesh Ratilal Marolia, ITA No.456 of 2007 (Bombay) 2. CIT Vs. Arun Kumar Aggarwal (HUF) Ors, Tax Appeal No. 13 of 2011. (Jharkhand ) 3. CIT-I Vs. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat) 4. CIT-I Vs. Himani M. Vakil [2014] 41 tadxdmann.com 425 (Gujarat) 5. DCIT Vs. Prempal Gandhi ITA No. 95/2017 Order dated 16.02.2017 (P H) 6. Smt. Sikha Dhawan Vs. ITO vide ITA No.3035/Del/2018 Order dated 27.06.2018 7. Prakash Chandra Bhutoria Vs. ITO vide ITA No.2394/Kol/2017 order dated 27.06.2018 8. CIT Vs. Subodh Kumar Jain, ITA No. 474 of 2009 (Allahabad) 9. CIT Vs. Shyam Sundar Agarwal ITA No.533 of 2009 (Allahabad) 10. CIT Vs. Udit Narain Agrawal, ITA 560 of 2009 (Allahabad) 11. CIT Vs. Neeraj Kumar Jain ITA No.295 of 2010 (Allahabad) 12. CIT Vs. Smt. Sumitra Devi [2014] 49 taxmann.com 37 (Rajasthan) 13. CIT -13 Vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bombay) 14. State of Karnataka Vs. Selvi J. Jayalilitha Ors. [2017] 392 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Vs. ACIT (ITA No.7024/Mum/2010) 8. Hon ble ITAT Mumbai in the case of ITO Vs. Shamim M. Bharwani (2016) (69 Taxmann.com 65) 9. Mr. Pankaj Agarwal Sons (HUF) Vs. ITO and batch of other appeals vide ITA No.1413/CHNY/2018 1420 /CHNY/2018 order dated 06.12.2018 10. Smt. M. K Rajeshwari Vs. ITO vide ITA No.1723/Bang./2018 order dated 12.10.2018 17. The Ld. Counsel for the assessee in his rejoinder submitted that the various decisions relied on by the Ld. DR are not applicable to the facts of the present case and are distinguishable on facts. 18. So far as the decision in the case of Sanjay Bimlachand Jain (supra) is concerned he submitted that this is a judgment delivered by SMC Bench and fact was that payment for acquisition of shares was made in cash which remained unsubstantiated and finally it was held by the ITAT that it was an adventure in the nature of trade. Therefore, surplus was assessable as income from business and profession under section 28 of the Act. 18.1. So far as the decision in the case of Chandan Gupta (supra) is concerned he submitted that in this case the finding of fact was that alleged claim of sale of shares is false and concocted, as no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the authorities below. We find the assessee in the instant case has claimed exemption of ₹ 2,21,23,710./- u/s 10 (38) of the IT Act in respect of long term capital gain on sale of shares of M/s. Kyra Landscapes Limited which was earlier known as M/s. TCL Technology Limited. We find the Assessing Officer on the basis of elaborate enquiries made from the bankers of the assessee company, company allotting the shares and other shareholders, SEBI and the report of the investigation wing etc came to the conclusion that the amount of ₹ 2,36,97,101/- represents unexplained cash credit to be taxed u/s 68 of the IT Act 1961. We find the Ld. CIT(A) upheld the action of the Assessing Officer, the reasons of which are already reproduced in the preceding paragraph. It is the submission of Ld. Counsel for the assessee that the assessee has invested an amount of ₹ 20 lacs through RTGS on 21st December, 2010 from his savings bank account maintained with Shivalik Mercantile Cooperative Bank Ltd. in M/s. TCL Technology Limited against which two lac equity shares of ₹ 10 /- each under preferential allotment scheme were allotted on 29.12.2010. The shares so allotted were credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an admitted fact that although the Assessing Officer had made enquiries from various entities i.e. assessee s banker, depository, broker and the banker of M/s. TCL Technologies Limited, however, nothing adverse have been found. There is no adverse finding by SEBI in relation to the scrip in question has been given to the Assessing Officer. Further in response to notice u/s 131 Sh. Sachin Jain, Frenchise of M/s. Globe Capital Market Ltd, appeared before the Assessing Officer and his statement was recorded wherein he has confirmed to have executed the order for sale of shares. Therefore, merely on the basis of preponderance of human probabilities the addition cannot be made in the hands of the assessee without disproving the various documents filed by the assessee. 22. We find the Hon ble Bombay High Court in the case of CIT Vs. Mukesh Ratilal Marolia, in ITA No.456/Del/2007 Order dated 07.09.2011 has observed as under :- 3 The Assessee was carrying on business of manufacturing handkerchiefs as the proprietor of Rumal Manufacturing Company. In the Assessment Year in question the Assessee claimed that he had sold the shares of four companies, namely, M/s Alang Industrial Gase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer was not justified in holding that the amount of ₹ 1,41,08,484/- represented unexplained investment under Section 69 of the Income Tax Act, 1961 cannot be faulted. 7. In the result, we see no merit in this Appeal and the same is dismissed with no order as to costs. 23. We find the Hon ble Jharkand High Court at Ranchi in the case of CIT Vs. Arun Kumar Agarwal (HUF) Ors, Tax Appeal No. 13 of 2011, since report in [2013] DTR (Jharkhand) 219 order dated 13.07.2012 observed as under :- 10. We have considered the submissions of the learned counsel for the parties and we are of the considered opinion that the learned Assessing Officer was much influenced by the enqiury report which may has been brought on record by the efforts of the Assessing Officer and that enquiry report was prepared by the SEBI and from the observations made by the Assessing Officer himself, it is clear that after getting that enquiry report, the SEBI prima fade found involvement of some of the share brokers in unfair trade practices. Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved that the assessee had held the shares much prior to 12 months of the sale of the shares. 24. We find the Hon ble Gujarata High Court in the case of CIT-I Vs. Maheshchandra G. Vakil [2013] 40 taxman.com 326 (Gujarat) has observed as under :- 5. In the light of the above findings of fact recorded by the Tribunal, it is not possible to state that the view adopted by the Tribunal is, in any manner, unreasonable or perverse. Besides, the learned counsel for the appellant is not in a position to show that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor is he able to point out any material to the contrary so as to dislodge the concurrent findings of fact recorded by the Tribunal. Under the circumstances, the impugned order being based upon concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence of record, does not give rise to any question of law, much less, a substantial question of law so as to warrant interference. The appeal is, accordingly, dismissed. 25. We find the Hon ble Gujarata High Court in the case of CIT-I Vs. Himan M. Vakil [2014] 41 taxman.com 425 (Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, the impugned order being based upon concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence of record, does not give rise to any question of law, much less, a substantial question of law so as to warrant interference. The appeal is, accordingly, dismissed. 26. We find the Hon ble Punjab Haryana High Court in the case of Prem Pal Gandhi (supra) has observed as under :- 2. The following questions of law have been raised:- ( i) Whether on the facts and in the circumstances of the case, Income Tax Appellate Tribunal has erred in law in upholding the order of the C1T(A) deleting the addition of ₹ 4,11,77,474/- made by the AO on account of sham share transactions ignoring an important aspect that the transaction of shares showing their purchase price at ₹ 11,00,000/- and sale consideration at ₹ 4,23,45,295/- within a period of less than two years/purchases of shares made in cash not cheque that too before shares got dematerialized / worth of the company at the time of purchase./ sale of shares not proved All suggest non-genuineness of the said transaction ? ( ii) Whether on the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) 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. 5 . 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 assessee during the assessee 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. 6 . In the result circumstances, the appeal is dismissed. 27. We find the Co-ordiante Bench of the Tribunal in the case of Smt. Shikha Dhawan (supra) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the issue is covered in favour of the assessee by the order of ITAT, Delhi Bench in the case of Meenu Gael vs ITO (supra) followed by judgment 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. 9. Keeping in view of the above discussion and the material on record, in the light of the order of the Tribunal in the case of Meenu Goel vs. ITO (supra), I set aside the orders of the authorities below and delete the addition of ₹ 19,51,357/-. The appeal of the assessee is, accordingly, allowed. 10. In the result, the appeal of the assessee is allowed. 28. We find the Kolkata Bench of the Tribunal in the case of Prakash Chand Bhutoria (supra) has dealt with identical issue where the long term capital gain on account of sale of shares of M/s Unno Industries Ltd. was denied by the Assessing Officer on the basis of report of the Investigation Wing of Kolkata and the Id. C1T(A) upheld the action of the Assessing Officer. On further appeal by the assessee, the Tribunal deleted the addition made by the Assessing Officer u/s 68 by observing as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Id. Tribunal after considering the mate rip 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 01.04.2004 to 31.03.2005 i.e. relevant for the assessment year under appeal (2005-06) are before us. There cannot be any doubt about the transaction as has been observed by the Assessing Officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through demat format. Hence, we agree with the given findings of the Ld. Commissioner of Income Tax (Appeals ) in accepting the transactions as genuine too. In view of the fact findings we cannot reappreciate, recording is such, cannot be said to be perverse as it is not fact finding of the Ld. Tribunal alone. The commissioner of Income Tax came to the same fact finding. Concurrent fact finding itself makes the story of perversity, unbeli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Long Term Capital Gains. However, the 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. 8.4. In the light of the documents stated i.e. (I to xiv) in Para 6(supra) we find that there is absolutely no adverse material to implicate the assessee to have entered 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 Id. DR could not controvert the facts supported with material evidences which are on record and could only rely on the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We, therefore, direct the AO to delete the addition. 9. In the result the appeal of the assessee is allowed. The A bench of the Kolkata Tribunal in the case of lTO vs. Shaleen Khemani in l.T.A. No. I945/Kol/2014 dated 18.10.2017 at para 9.1. to 9.4 held as follows: 9.1 We further find that the transaction of sale of shares by the assessee was duly backed by all evidences including Contract Notes, Demat Statement, Bank Account reflecting the transactions, the Stock Brokers have confirmed the transactions, the Stock Exchange has confirmed the transactions, the Shares have been sold on the online platform of the Stock Exchange and each trade of sale of shares were having unique trade no. and trade time. It is not the case that the shares which were sold on the date mentioned in the contract note were not traded price on that particular date. The Id AO doubted the transactions due to the high rise in the stock price but for that, the assessee could not be blamed and there was no evidence to prove that the assessee or any one on his behalf was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of ₹ 25,30,396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of Id. C1T(A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed. We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law. 9.3. We therefore hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the Id AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld. DR could not controvert the arguments of the ld. AR with contrary material evidences on record and merely relied on the orders of the ld. Assessing Officer. We find that the allegation that the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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