TMI Blog2019 (6) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... ount has been received by assessee has not been cancelled by the stock exchange/SEBI. So, it is difficult to countenance the action of AO/Ld. CIT(A) in the aforesaid facts and circumstances explained above. There is also nothing on record which could suggest that the assessee gave his own cash and got cheque from the alleged brokers/buyers. The assessment refers also to some third party statement of Shri Sunil Dokania which was admittedly recorded behind the back of the assessee and the assessee has neither been allowed to cross examine this person by the assessee nor the statement of Shri Sunil Dokania furnished to assessee, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee It is clear from the above that the facts of the case of the assessee are identical with the facts in the above case wherein the co-ordinate bench of the Tribunal has deleted the addition in the case of Shri Manish Baid [ 2017 (10) TMI 522 - ITAT KOLKATA] in respect of sale of shares of M/s KAFL - direct the AO not to treat the long term capital on sale of shares of M/s KAFL as bogus and delete the consequential addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of hearing it was brought to my notice by the Ld. AR that this Tribunal in the following cases have decided that the scrips of KAFL are not bogus and held that the LTCG claim of the assessee needs to be allowed: i) Manish Kumar Baid Vs. ACIT, ITA Nos. 1236 1237/Kol/2017 dated 18.08.2017 ii) Rukmini Devi Manpria Vs. DCIT, ITA No.1724/Kol/2017 dated 24.10.2018 iii) Jagmohan Agarwal Vs. ACIT, ITA No.604/Kol/2018 dated 05.09.2018. It was also brought to our notice by the Ld. AR that AO was influenced by an interim order of SEBI dated 29.03.2016, which the SEBI has withdrawn by later order dated 21.09.2017 by virtue of it all the restrictions imposed upon by the earlier order dated 29.03.2016 has been withdrawn, since SEBI could not find any infirmity in the scrips of M/s. KAFL. So he pleaded that the claim of assessee for LTCG should be allowed. 5. On the other hand, the Ld. DR for the Revenue vehemently opposed the contentions of the assessee and took us through the AO s order and Ld. CIT(A) order and submitted that scrips of M/s. KAFL was artificially rigged to provide LTCG to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nominal rate in large quantity which assessee claimed as an investment. Considering the circumstances of that case the Assessing Officer did not accept the claim of the assessee and held that the transaction with a penny stock of an insignificant company, its subsequent the merger with a new company, and ultimate sale of the shares of the new company at such an higher profit within a short period of time falls in the ambit of an adventure in the nature of trade, and so, AO brought the aforesaid amount to tax under the head 'business income'. On appeal, the Commissioner (Appeals), as well as, the Hon'ble Tribunal upheld the decision of the Assessing Officer. In view of the above it is submitted that assessee's dealing with this stock may be considered as an adventure in the nature of trade and so, profit derives from such activity may kindly be considered as income from business or other sources. 6. We note that similar issue arose in Manish Kumar Baid, (supra) wherein, the Tribunal allowed the claim of assessee in respect of LTCG from sale of scrips of M/s. KAFL has held as under: 6. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of CPAL were purchased by the assessee way back on 20.12.2011 and pursuant to merger of CPAL with KAFL, the assessee was allotted equal number of shares in KAFL, which was sold by the assessee by exiting at the most opportune moment by making good profits in roder to have a good return on his investment. We find that the assessee and / or the broker Ashita Stock Broking Ltd was not the primary allottees of shares either in CPAL or in KAFL as could be evident from the SEBI s order. We find that the SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd s name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI s order heavily relied upon by the ld AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is no evidence against the assessee, much less to speak of direct evidence. The enquiry by the Investigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade for purchase of shares found placed at pages 8-9 of paper book). The aforesaid 40,000 shares of M/s. Panchshul Marketing Ltd. were received in the DEMAT (page 11 of paper book). The said company (M/s. Panchshul Marketing Ltd.) was later merged with M/s. Kailash Auto Finance Ltd. as per the order of the Hon ble High Court of Allahabad dated 09.05.2013 and consequent to merger, the assessee had received 40,000 shares of M/s. KAFL. The assessee sold the said shares during the previous year relevant to assessment year under consideration and such sale was made in the Bombay Stock Exchange through M/s. Sbicap Securities, a registered share and stock broker (contract note placed at pages 12 to 14 of Paper Book) after duly paying the Security Transaction Tax (STT). The sale consideration the assessee received by account payee cheque in its State Bank of India account which is evident from the bank statement filed before us at page 15 of the paper book. Therefore, the long term capital earned in the process has been claimed as exempt income under section 10(38) of the Act. I also note that in support of the assessee s contention various documents had been filed during the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to even bother to look into the website of Govt. of India, so the adverse inference in this regard is misplaced. 9. The fact of holding the shares in the D-mat account 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 Dmat 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 report of Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee. 10. The Mumbai Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions 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. 11. Therefore, when 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 then, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all the material facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment refers also to some third party statement of Shri Sunil Dokania which was admittedly recorded behind the back of the assessee and the assessee has neither been allowed to cross examine this person by the assessee nor the statement of Shri Sunil Dokania furnished to assessee, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee (Reliance on Hon ble Supreme Court decision in Andaman Timber (supra) and in the light of the documents to substantiate the claim of LTCG, which has not been found fault with by the AO. 15. Let us look at certain judicial decisions on similar facts:- 16. The case of the assessee s is similar to the decision of Hon ble Bombay High Court, Nagpur Bench in CIT vs. Smt. Jamnadevi Agrawal Ors. dated 23rd September, 2010 reported in (2010) 328 ITR 656 wherein it was held that: 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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the appeal of department observing 'Whether or not there was sale of shares and receipt of consideration thereof on appreciated value is essentially a question of fact. CIT(A) and Tribunal have both given reasons in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations, of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. Therefore, 'the prese/itdppeal does not raise any question of law, much less any substantial question of law. 17. The Hon ble High Court of Punjab and Haryana in the case of Anupam 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 ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. The entire assessment is based upon the statement of Shri Mukesh Choksi. It is an undisputed fact that neither a copy of the statement was supplied to the assessee nor any opportunity of cross-examination was given by the Assessing Officer/CIT(A). The Hon ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:- 6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. 15. The Hon ble Apex Court held as under:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 16. On the strength of the aforementioned decision of the Hon ble Supreme Court, the assessment order has to be quashed. 17. Even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never 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 fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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