TMI Blog2019 (7) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... show that the documents placed before us were sham, bogus or there was any factual infirmity therein. D.R. also could not controvert the ld. A.R s submissions that the disallowance was made solely on the basis of the report of the Investigation Wing in the shares of M/s KAFL. D.R. could not bring to our attention any material or evidence from which one could infer that the transactions in shares of M/s GCM Securities Limited were either manipulated or sham or that any enquiry was conducted either by the Investigation Wing or by the AO in respect of assessee s transactions in shares of M/s GCM Securities Limited. Both the lower authorities were not justified in not allowing the appellant s claim for exemption u/s 10(38) in respect of the profit derived by the appellant on sale of 6400 shares of M/s GCM Securities Limited. Appeal of the assessee is allowed. - I.T.A. No. 161/Kol/2019 - - - Dated:- 1-7-2019 - Shri A. T. Varkey, JM And Dr. A. L. Saini, AM For the Appellant : Shri Akkal Dudhwewala, ACA For the Respondent : Shri Satyajit Mondal, Addl. CIT, Sr. DR ORDER PER SHRI A.T.VARKEY, JM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic at large by issue of prospectus. It was thus not a case where the shares were acquired through private placement where there could be an allegation for manipulation. We further note that the assessee has sold the shares through stock-broker, M/s. Sosha Credit Private Limited, a Member of the Bombay Stock Exchange, SEBI Registration No. INB010783430 and Trading Code No. 3076. We note that the assessee has sold 6400 nos. of shares of GCM Security Ltd. The details of shares are as under: The copy of contract notes along with bank statement where sale proceed of shares has been deposited is found placed in the paper book Pages18 to 23. We also note that the assessee has sold the share after one year of time from the time of its purchase. Clause 38 [w.e.f. 01.10.2004] has been inserted in section 10 of the Act, which envisages that income arising out of transfer of Long Term Capital Asset being an equity share in a company on which STT is paid is exempt from tax. Since the equity shares of the company [GCM Securities Ltd] has been held by the assessee for more than a year and later sold on recognized stock exchange on which STT has been paid, the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO presumed that the appellant s transactions in shares of M/s GCM Securities Limited was also bogus. We therefore find that there was no independent and objective application of mind by the AO in respect of the appellant s transactions in the shares of GCM Securities Limited and the ultimate disallowance was prompted solely based on the facts discussed by the AO in respect of transactions in M/s KAFL shares. 6. We also find that in the appellate proceedings, the Ld. CIT(A) rejected the appellant s claim for exemption u/s 10(38) only because in his opinion the increase in the share prices of M/s GCM Securities Limited was abnormal and that one of the Director of the company in question was Mr. Manish Baid who was a tainted person. Thus we note even at the first appellate stage there was no objective enquiry in respect of the contemporaneous transactional documents and evidences, which the appellant had furnished in support of her share transactions. From the paperbook filed we note that before the lower authorities as well as before us the assessee had filed requisite documents to substantiate the claim of exemption made u/s 10(38) upon sale of shares of M/s GCM Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts of M/s GCM Securities Limited for the FY 2014-15. On scrutiny of these accounts we note that during the year under consideration the turnover of the assessee was ₹ 3,31,90,405/-. It was also noted that the profit disclosed by the company for the FY 2014-15 was ₹ 1,36,18,752/- which was more than 1266% in comparison to last year s profit of ₹ 10,75,155/-. In its Profit Loss Account had made provision for tax of ₹ 29,06,964/-. The Ld. AR also drew our attention to the Schedule 2.10, which contained details of investments held by the company, which primarily consisted of blue chip securities inter alia including Reliance Industries Limited, Power Grid Corporation of India Ltd, Tata Steel Limited, Bharti Airtel Limited, Coal India Ltd etc.. The fixed assets of the company were to the order of ₹ 1,87,48,523/-. The Ld. AR finally drew our attention to the fact that during the financial year ended 31st March 2015, M/s GCM Securities Limited had proposed and paid interim dividend at the rate of 4% to its shareholders. From the foregoing facts and figures it cannot be said that M/s GCM Securities Limited was a company not having requisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO, which could have lead to a conclusion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO merely on surmises and conjectures. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the AO. --Therefore, the AO could not have added income, which was rightly deleted by the CIT(A) as well as the Tribunal. It is settled law that suspicion, howsoever strong cannot take the place of legal proof. Consequently, no question of law, much less a substantial question of law, arises for adjudication.-- C. Vasantlal Co. vs. CIT (1962) 45 ITR 206 (SC), M.O. Thomakutty vs. CIT (.1958) 34 ITR 501 (Ker)) and Mukand Singh vs. Sales Tax Tribunal (1998) 107 STC 300 (Punjab) relied on; Umacharan Shaw Bros. vs. CIT (1959) 37 ITR 271 (SC) Applied; Jaspal Singh vs. CIT (2006) 205 CTR (P H) 624 distinguished 10. Useful reference in this regard may also be made to the following judgments of the Hon ble jurisdictional Calcutta High Court invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed. vi) CIT V. Andaman Timbers Industries Limited [ITA No. 721 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 account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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