TMI Blog2019 (6) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out any stage managed/pre determined sale of the shares as contended by the AO. SEBI s report also does not in any way point out any wrong action against the assessee s broker or the scrips. We note that there is no specific evidence which have been collected by the AO in coming to a conclusion that the sale consideration from the sale of shares of M/s. GIFL is bogus. Lower authorities erred in holding the assessee s claim on LTCG from the sale of shares of M/s. GIFL as bogus. Therefore, we are inclined to allow the assessee s LTCG claim and, therefore, the appeal of assessee is allowed. - I.T.A. No. 194/Kol/2018 - - - Dated:- 3-6-2019 - Shri A. T. Varkey, JM And Shri M. Balaganesh, AM For the Applicant : Shri Subash Agrwal, Advocate For the Respondent : Shri Robin Choudhury, Addl. CIT, Sr. DR ORDER PER SHRI A.T.VARKEY, JM This appeal has been filed by the assessee against the order of Ld. CIT(A)-10, Kolkata dated 26.12.2017 for AY. 2014-15. 2. Main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of ₹ 70,07,666/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the AO has erred in taking note of the facts properly. According to him, M/s. ACFL never merged with M/s. GIFL. The change was only in respect of name from M/s. ACFL to M/s. GIFL which is evident from the Certificate of Incorporation dated 28.02.2012 issued by Govt. of India, Ministry of Corporate Affairs. He also drew our attention to the fact that the AO erred in taking note that the assessee was not involved in the regular activities of transaction of shares. The Ld. AR drew our attention to page 9 of the paper book to show that the assessee in this assessment year itself was involved in investments of M/s. Ajanta Pharma Ltd., M/s. Asian Link as well as M/s. AKZO Nobel. So, according to Ld. AR, the AO erred in even taking note of the facts which were on record. According to him, with a prejudiced mind the AO being influenced by the Investigation Wing s report (general report) as well as the SEBI s observation in some other cases has denied the claim of the assessee without any material against the assessee/broker/scrips on which the sale consideration the assessee received. According to Ld. AR, there is no whisper in the entire assessment order against the assessee/br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to ld. DR. is nothing but a stage managed/predetermined show and then the beneficiary collects whole consideration in the form of cheque and later the assessee claims the amount which assessee gets as LTCG which is exempt from tax. This according to ld DR is nothing but a bogus claim, so the AO as well as the Ld. CIT(A) has taken note of these facts to deny the assessee her claim. For doing so, the Ld. DR relied on the following decisions: i) Balbir Chand Maini Vs. CIT (2011) 12 taxmann.com 276, ii) Chandan Gupta Vs. CIT (2015) 54 taxmann.com 10, iii) Smt. M. K. Rajeswari, ITAT, Bangalore dated 12.10.2018, iv) Vandana K. Mehta, ITAT, Mumbai dated 18.07.2013, v) Mahendra Kumar Bhandari Vs. ITO, Chennai, dated 06.04.2018, vi) Mr. Jayesh S Patel Vs. SEBI, Securities Appellate Tribunal, Mumbai, Appeal No. 456 of 2015 dated 25.04.2018, vii) Prem Jain Vs. ITO, ITAT, Delhi dated 26.03.2018, viii) Ratnakar M. Pujari, ITAT, D Bench, Mumbai dated 03.08.2016, ix) Ritu Sanjay Mantry Vs. ITO, ITAT, Mumbai dated 09.02.2018, x) SEBI Vs. Rakhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper book. Copy of demat statement is available at pages 20 to 24 of the paper book from which statement we note that it reflects debit entry for the shares from the account. Ledger copy of the broker M/s. J. M. Financial Services also has been filed at page 18 of the paper book. The sale considerations have happened through the banking channel (Vijaya Bank) and are placed at page 19 of the paper book. We note that the AO has reproduced certain portions of the general report of Investigation Wing of the Income Tax Department. Nowhere from the general report of Investigation Wing is it seen that the assessee has indulged in any nefarious activities or her broker has carried out any stage managed/pre determined sale of the shares as contended by the AO. SEBI s report also does not in any way point out any wrong action against the assessee s broker or the scrips. We note that there is no specific evidence which have been collected by the AO in coming to a conclusion that the sale consideration from the sale of shares of M/s. GIFL is bogus. We note that the Tribunal had an occasion to examine the claim of an assessee on the same scrip namely, M/s. GIFL and has allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. 7. The proposition of law laid down in these case laws by the Jurisdictional High Court as well as by the ITAT, Kolkata on these issues are in favour of the assessee. These are squarely applicable to the facts of the case. The Ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the Ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon ble Jurisdictional Calcutta High court and the ITAT. I am bound to follow the same. 7. Therefore, in the light of the aforesaid facts and circumstances, we do not find any material to hold that the assessee s claim of LTCG is bogus. For doing so, we rely on the decision in the case of ITA Nos. 1197, 1054 1198/Kol/2018 in Mr. Sanjiv Shroff Vs. ACIT Ors for AY 2014-15 dated 02.01.2019 (though the scrip in that case was M/s. KAFL wherein on similar reasons the AO held the claim of LTCG as bogus) wherein it has been held as under: 20.We note that the sale of shares of M/s. KAFL which was dematerlized in Demat account has taken place thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 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 stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous 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 be in possession of the appellant themselves to explain as to why their exfactory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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 the gains arising out of the sale of shares under the head capital gains- Short Term or Long Term as the case may be. The other grievance of the assessee becomes infructuous. 27. The assessee has fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine. 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. 28. We note that since the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing 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 ITYA No. 32/Agr/2007 (Agra ITAT) 30. Moreover it was submitted before us by ld AR that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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