TMI Blog2019 (5) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 07.09.2018 for AY 2014-15. 2. The main issue is in respect of ground nos. 3 and 4 of assessee s appeal is against the action of Ld. CIT(A) in confirming the addition made by the AO u/s. 68 of the Incometax Act, 1961 (hereinafter referred to as the Act ) in respect of short term capital gain and disallowance of claim for short term capital loss. 3. Briefly stated facts are that the assessee is an individual. According to AO, the assessee claimed short term capital gain of ₹ 3,07,339/- on sale of shares of M/s. Sulabh Engineers Ltd. ( M/s. SEL) as well as short term capital loss of ₹ 3,30,578/- on sale of scrips of M/s. SRK Industries. According to assessee, he had purchased 100 shares for ₹ 47,533/- of M/s. SEL on 03.01.2013 and thereafter sold the same on 22.10.2013 for ₹ 1,38,672/- and on 05.11.2013 @ ₹ 1,34,216/- and on 06.11.2013 at ₹ 1.,04,526/- and on 08.11.2013 at ₹ 10,079/- and on 07.11.2013 at ₹ 10,069/- thus made gain totaling to ₹ 3,97,564/-. It was brought to AO s notice that 200 shares of M/s. SEL was purchased and splitted on 04.02.2013 in the ratio 1:10 thus became 2000 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the assessee filed various details/documents/papers as aforestated before the AO to show that purchase and sale of share scrips of M/s. SEL which resulted in LTCG of ₹ 3,07,927/- and STCL of ₹ 3,30,578/- and which was claimed was not accepted by AO. However, the AO did not agree with the claim of the assessee and added the entire claim of ₹ 3,30,578/- (loss) + ₹ 3,09,927/- (gain). Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of AO. Aggrieved, assessee is before us. 4. The Ld. AR assailing the action of the Ld. CIT(A) contended that the Ld. CIT(A) arbitrarily brushed aside all the documents produced by the assessee to substantiate the claim and has gone by the test of human probability to nix the claim of assessee, which is not legally sustainable, so he wants us to allow the claim of the assessee in this regard. Further the Ld. AR submits that the assessee has discharged the onus on him to show that the transaction is in the recognized stock exchange through recognized stock broker and on online platform and the shares were held in de mat account and sold through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has purchased 2400 shares of M/s. SRK Industries for ₹ 4,37,138.33 and from perusal of page 12 of paper book, which is contract note of sale of shares of M/s. SRK Industries which shows that 2400 shares were sold on 13.03.2014 for ₹ 1,06,560.08. My attention was drawn by the Ld. AR to the contract note of sale of M/s. SEL which is placed from pages 6 to 10 of paper book wherein it is noted that there is a typographical error that instead of ₹ 3,97,564.82 it shows as ₹ 3,79,450/- which, according to Ld. AR, is a typographical error and the correct value is ₹ 3,97,564.82. I also note from pages 31 to 36 of the paper book, which is the bank statement of HDFC for the period from 01.04.2013 to 31.03.2014 that the entire transaction took place through the bank account. I also take note that the assessee had purchased the shares through M/s. SSJ Finance Securities Pvt. Ltd. which is recognized member of the Bombay Stock Exchange Ltd, SEBI Registration No. INB010960458 and sold it also through the same broker. Scrips of M/s. SRK Industries was also purchased and sold through the same broker. The AO was of the opinion that huge rise in the shares of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary ITA Nos. 93 to 99/RPR/2014 C.O. Nos. 12 to 18/RPR/2014 . A.Y. 2004-05 10 produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upam Kapoor 299 ITR 0179 has held as under:- The Tribunal on the basis of the material on record, held that purchase contract note, contract note for sates, distinctive numbers of shares purchased and sold, copy of share certificates and the quotation of shares on the date of purchase and sale were sufficient material to show that the transaction was not bogus but a genuine transaction. The purchase of shares was made on 28th April, 1993 i.e.. asst. yr. 1993-94 and that assessment was accepted by the Department and there was no challenge to the purchase of shares in that year. It was also placed before the relevant AO as well as before the Tribunal that the sale proceeds have been accounted for in the accounts of the assessee and were received through account payee cheque. The Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. 18. In the light of the decisions of the Hon ble Supreme Court in the case of Andaman Timber Industries (supra) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. 19. Accordingly, we direct the A.O. to treat th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities. 4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the ld. CIT(A). However we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. ii) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) In this case the ld AO found that the formal evidences produced by the assessee to support hug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of 2008] (Cal HC) In this case the Hon ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. vii) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] In this case the Assessee claimed exemption of income from 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC) . In this case the Hon ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld AR submitted that similar view has been taken in the following judgments while deciding the issue relating to exemption claimed by the assessee on LTCG on alleged Penny Socks. (i) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X
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