TMI Blog2019 (7) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... id companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the AO but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. We also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the assessee, she was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to all the persons who have brought the scrips in the entire country. Atleast some inquiry should have do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of companies, M/s Turbo Tech Engineering Ltd. of ₹ 20,55,146/-; and M/s Esteem Bio Organic Food Processing Ltd. (₹ 23,00,616/- (public limited companies listed on recognized stock exchange) and similar disallowances with respect to same scrips have been made in the cases of Shruti Luthra, Namrata Sehgal Luthra and Asha Luthra. Though the assessee had raised various grounds before us, the only effective issue involved in this appeal is as to whether the ld. CIT (A) was justified in confirming the addition made as alleged unexplained cash credit u/s 68 read with section 115BBE of the I.T. Act, 1961 by treating Long Term Capital Gain (LTCG) derived from sale of shares of companies M/s Turbo Tech Engineering Ltd. (₹ 20,55,146/-) and M/s Esteem Bio Organic Food Processing Ltd. (₹ 23,00,616/-) on the facts and in circumstances of the case. 4. The brief facts are that the assessee filed her return of income for the AY 2014-15 on 31.07.2014 declaring total income of ₹ 16,01,720/-, wherein she had declared income from salary, house property and other sources and also income from investing in shares. The assessee claimed exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 20, 000/- ₹ 20, 000/- ₹ 20, 000/- ₹ 20, 000/- Date of shares sold 23.07.2013 (3000 shares), 03.09.2013 (3000 shares) and 10.09.2013 (4000 shares) 06.09.2013 (10000 shares) 19.10.2013 (10000 shares) 24.09.2013 Sale Price per share ₹ 314.88, ₹ 151.25 and ₹ 164.189 per share ₹ 276.70 per share ₹ 178. 85 per share ₹ 182.60 per share Total sale consideration ₹ 20,55,146/- ₹ 27,67,036/- ₹ 17,88,463/- ₹ 18,25,780/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total purchase consideration ₹ 1,50,000/- ₹ 1,50,000/- ₹ 1,50,000/- - Date of shares sold 25.02.2014 (2400 shares), 26.02.2014 (2400 shares) and 03.03.2014 (1200 shares) 14.03.2014 (6000 shares) 26.03.2014 (4800 shares) - Sale Price per share ₹ 376.22, ₹ 383.62 and ₹ 397.50 per share ₹ 424.154 per share ₹ 487.50 per share Total sale consideration ₹ 23,00,616/- ₹ 25, 44, 924/ ₹ 23,39,976/- - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scrip of M/s Esteem Bio and M/s Turbotech were used to provide bogus LTCG to various beneficiaries. Thereafter, the Assessing Officer after explaining the modus operandi of bogus LTCG held that the transactions of the assessee were sham transactions and the LTCG so declared of a sum of ₹ 41,85,762/- was nothing but unexplained Cash Credit under section 68 of the Act to be taxed @ 30% under section 115BBE of the Income Tax Act, 1961 in the hands of the assessee. 6. In the first appeal, the Ld. Commissioner of Income Tax (Appeals) confirmed the order of the AO by observing that the documents submitted as evidence to prove the genuineness of the transaction are make believe documents to cover up the true nature of the transactions, as it is revealed that the purchase and sale of shares are arranged transactions to create bogus profit in the garb of LTCG by well-organized network of entry providers with the sole motive to sell such entries to enable the beneficiary to account for the undisclosed income for a consideration or a commission. 7. Before us, Ld. Counsel for the assessee, Mr. Salil Aggarwal submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) that increase in the price of M/s Esteem and M/s Turbotech was without any backing of the Financial Results is immaterial as the assessee had sold the shares on recognized stock exchange through a recognized stock broker and the prices of shares duly listed on stock exchange are not in control of assessee and nor any such allegation has surfaced on record that the assessee is involved in price manipulation of aforesaid scrips. He further submitted that reliance placed by AO on the interim order of SEBI, wherein, trading in securities of M/s Esteem Bio and M/s Turbotech were suspended temporarily is misconceived, as vide Adjudication Orders dated 06.09.2017 in the case of M/s Esteem Bio and 25.11.2014 in the case of M/s Turbotech, SEBI has found no irregularities in the trading of such scrips nor it has found its directors involved in any price rigging (said orders were placed in the paper book at pages 3 to 13 and 14 to 18 of PB II) and thus, the reliance placed by AO on interim order of SEBI is uncalled for and unjustified. It was further argued that the AO has relied on various statements of alleged entry operators which have surfaced directly in the order of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 24.02.2014. Copy of judgment of Hon ble Allahabad High Court in the case of CIT vs. Anirudh Narayan Agrawal reported in 219 Taxman 126 dated 16.01.2013. Copy of order of Hon ble ITAT Raipur in the case of DCIT vs Rakesh Saraogi Sons (HUF) in ITA No. 93 to 99/RPR/2014 dated 16.04.2018. Copy of order of Hon ble ITAT Mumbai in the case of ITO vs M/s Arvind Kumar Jain (HUF) in ITA No. 4862/Mum/2014 dated 18.09.2017. Copy of order of Hon ble ITAT Jaipur in the case of Sh. Pramod Jain vs ITO in ITA No. 368/Jp/2017 dated 31.01.2018. Copy of order of Hon ble ITAT Delhi in the case of Shobhit Goel (HUF) in ITA No. 2021/Del/2018 dated 25.09.2018. Copy of order of Hon ble ITAT Delhi in the case of Smt. Sunita Khemka vs ACIT in ITA No. 389/Del/2018 dated 02.08.2018. Copy of order of Hon ble ITAT Delhi in the case of Chander Prakash vs ITO in ITA No. 6880/Del/2017 dated 12.03.2018. Copy of order of Hon ble ITAT Kolkata in the case of Prakash Chand Bhutoria vs ITO in ITA No. 2394/Kol/2017 dated 27.06.2018. Copy of order of Hon ble ITAT Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs Rashtradoot (HUF) reported in 412 ITR 17. (iii) That further, even on facts, the said order in the case of Udit Kalra vs ITO is distinguishable. As, the interim order of SEBI in the case of both the companies have been cooled down by subsequent orders of SEBI. Thus, the case of Udit Kalra vs ITO relied by ld. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Rather the case laws so relied by assessee are directly applicable to the facts of assessee which have not been rebutted by ld DR. 12. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. We find that the transactions of the assessee of purchase of shares of M/s Esteem Bio and M/s Turbotech., holding of the shares for more than one year and the sale of shares through a registered share broker in a recognized Stock Exchange and payment of Securities Transaction Tax thereon, all were supported by documentary evidences which were placed before the lower authorities. The Revenue could not point out any specific defect with regards to the documents so submitted by assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned 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 crossexamine, 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 ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders of the co-ordinate Bench of the tribunal, in respect of the same company i.e. M/s Kappac Pharma Ltd., andpointed out that the tax authority s approach in this case was entirely erroneous and inconsistent. The main thrust of the assessee s argument is that he was denied the right to cross-examination of the two individuals whose statements led to the inquiry and ultimate disallowance of the long term capital gain claim in the returns which are the subject matter of the present appeal. This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent A.O., CIT(A) and the ITAT have all consistently rendered adverse findings what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibits the purchase of shares in cash, however in the present case, assessee had filed copies of bills of purchase, copy of share certificates and transfer forms etc. before Ld. AO and no adverse inference could be drawn only because the shares were purchased in cash. Regarding Demat of shares, we hold that it is the option of the buyer of shares to keep the shares either in Demat form or in paper form. Merely because the shares were dematted at a later stage, no adverse inference could be drawn. The Learned Counsel for the Assessee has taken us through various documents filed in the paper book as referred to above which specifically prove the purchase of shares made by assessee genuinely which were also sold genuinely. The transactions were carried through Demat account and banking channel on which STT has been paid by assessee. The report of the SEBI was not adverse in nature against the assessee because name of the assessee did not appear therein for conducting dubious transaction. The report of the Investigation Wing and other material was neither confronted to assessee nor there was any inquiry from where it transpired that assessee was beneficiary of any bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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