TMI Blog2019 (8) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITAT JAIPUR] addition made by the AO based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Thus when the assessee has produced all the supporting evidences which has not been controverted or disputed by the AO, then we do not find any error or illegality in the order of the ld. CIT (A) qua this issue. - Decided in favour of assessee. - ITA No. 532/JP/2019 - - - Dated:- 8-8-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri P.C. Parwal (CA) For the Revenue : Shri J.C. Kulhari (JCIT) ORDER PER VIJAY PAL RAO, J.M. This appeal by the revenue is directed against the order dated 4th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a show cause notice to the assessee as to why in view of search and seizure action carried out by the department in cases of different entities which has resulted unearthing of huge long term capital gain scam involving syndicate of operators providing bogus accommodation entries, the capital gains declared by the assessee shall not be treated as bogus transaction. The AO has also made reference to the statement of one Shri Vikrant Kayan recorded under section 133A on 09.06.2014 by the Investigation Wing, Kolkata and pointed out that Shri Vikrant Kayan has admitted his involvement in providing accommodation entries to different parties through various entities and shares of various companies including M/s. Trinity Tradelink Ltd. The assessee contested the show cause notice and submitted before the AO that it has purchased the shares of M/s. Trinity Tradelink Ltd. prior to its merger with M/s. Omnitech Petroleum Ltd. formerly known as Sharp Trading Finance Ltd. which was a listed company and, therefore, the shares of M/s. Trinity Tradelink Ltd. purchased by the assessee were prior to the listing of the said company in the said name. The assessee produced the relevant recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Shri Vikrant Kayan clearly explained the modus operandi of providing the accommodation entries of bogus bill, share capital, long term capital gain etc. He has also given the names of various concerns which were managed and the accommodation entries in the shares of those concerns were being provided. Thus M/s. Trinity Tradelink Ltd. is one of the entities as admitted by Shri Vikrant Kayan, shares of which the assessee has claimed to have purchased and sold. The ld. D/R has also referred to the price chart of the shares of M/s. Trinity Tradelink Ltd. as reproduced by the AO and submitted that how the assessee can purchase a share at the price of ₹ 10/- each when the same was sold around about ₹ 1,000/- each within a short period of one year. Therefore, having regard to the surrounding circumstances as well as outcome of the investigation conducted by the department at different places, the AO has established the fact that the transaction of purchase and sale of shares by the assessee of M/s. Trinity Tradelink Ltd. is a bogus transaction being accommodation entry of long term capital gain which is claimed as exempt. Thus the assessee s own unaccounted income has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... converted into a public limited company. After the shares purchased by the assessee, the said company was amalgamated with one M/s. Omnitech Petroleum Ltd. (formerly known as Sharp Trading Finance Ltd.) vide approval of amalgamation by the Hon ble Bombay High Court dated 10th January, 2014 with effect from 01.04.2012. The ld. A/R has referred to the decision of Hon ble High Court and submitted that the transferor company was incorporated as private limited company with the name M/s. Trinity Tradelink on 1st May, 2007. Thereafter the said company was converted into public limited company and accordingly the name of the company was changed to M/s. Trinity Tradelink Ltd. with effect from 23rd December, 2011. The transferee company was incorporated as M/s. Sharp Trading Finance Ltd. on 30th March, 1985 as a public limited company. Thereafter, the name of the company was changed from M/s. Sharp Trading Finance Ltd. to M/s. Omnitech Petroleum Ltd. on 19th April, 2011. On amalgamation of M/s. Trinity Tradelink Ltd. with M/s. Omnitech Petroleum Ltd. the shares of transferee company were issued in the ratio of 1:1 to the shareholders of transferor company. Thus the assessee received t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain as bogus is not sustainable in law. He has also relied upon the decision of Hon ble Jurisdictional High Court dated 11.09.2017 in case of CIT vs. Pooja Agarwal in DB IT Appeal No.385/2011. He has also relied upon the order of this Tribunal dated 31st January, 2018 in case of Shri Pramod Jain vs. DCIT in ITA No. 368/JP/2017. The ld. A/R has referred a series of decisions of this Tribunal as well as Coordinate Benches of the Tribunal wherein the long term capital gain treated as bogus accommodation transaction by the AO has been held as genuine transaction as the assessee has produced all the supporting evidences. 6. We have considered the rival submissions as well as the relevant material on record. The assessee purchased 20,000 shares of M/s. Trinity Tradelink Ltd. @ ₹ 10/- each for a total consideration of ₹ 2,00,000/-. The assessee has produced the share certificate of the shares whereby the shares were initially issued in the name of M/s. Amarkantak Procon Pvt. Ltd. and were transferred in the name of the assessee vide endorsement dated 31st October, 2012. As per the sale bill dated 07.10.2012 the payment of purchase consideration has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares of M/s. Trinity Tradelink Ltd. which was not listed in the Stock Exchange in the year 2012 but only after amalgamation of the said company with M/s. Omnitech Petroleum Ltd. (formerly known as Sharp Trading Finance Ltd.) as per the approval of amalgamation by the Hon ble Bombay High Court vide decision dated 10th January, 2014, the amalgamated company shares got listed by virtue of amalgamation. At the time of amalgamation, M/s. Trinity Tradelink Ltd. amalgamated in M/s. Omnitech Petroleum Ltd. but subsequently the said company also changed its name to M/s. Trinity Tradelink Ltd. which has resulted this confusion of prevailing share price in the Stock Exchange in the years 2012 to 2014. Thus we find that the said comparison of the AO of the prevailing price in the year 2012 with the price of the shares of amalgamated company in the year 2014 is misconceived. The AO has not conducted any independent enquiry or investigation to verify the genuineness of the transaction but has referred the investigation conducted by the department and a report received by the AO. It is pertinent to note that the said report as referred by the AO and reproduced in the assessment order is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mat Account is also independently verifiable and cannot be disputed in the absence of any contrary material to show that the Demat Account produced by the assessee itself is bogus. We further note that this is not a case of purchase of penny stock of a company and within a short period there is an unprecedented hike in the sale price of the shares, but in case the assessee purchased the shares of unlisted company which was subsequently amalgamated with a listed company and, therefore, the value of the amalgamated entity is certainly very higher than the value of share of unlisted company though there can be a question about the sweep ratio of the shares. However, the same has not been doubted by any authority and the scheme of amalgamation was duly approved by the Hon ble High Court. Thus there is an extraordinary event in this case of amalgamation of unlisted company with a listed company and consequently there is a sudden increase in the price of the shares of amalgamated entity. The ld. D/R has relied upon the decisions of Hon ble Delhi High Court as well as Hon ble Bombay High Court. In case of Udit Kalra vs. ITO (supra), the shares of one M/s. Kappac Pharma Ltd. were purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies on 05.02.2011 and hence, the date mentioned in the order of the Hon ble Kolkata High Court as 18.04.2011 appears to be typographical mistake. Even otherwise these two dates do not have any effect on the genuineness of the transactions of purchase of equity shares by the assessee of M/s Gravity Barter Pvt. Ltd. The assessee though produced all the relevant records and evidences right from the purchase bills, certificate issued by the Registrar about the change of name, the communication between the assessee and the seller of the shares and thereafter, the amalgamation of M/s Gravity Barter Ltd. with M/s Oasis Cine Communication Ltd. which was duly approved by the Hon ble High Court vide order dated 28.8.2011. The assessee in the mean time got the physical share certificate dematerialized into Demat account on 16.02.2012. There is no reason to doubt the allotment of the shares to the assessee after amalgamation took place between M/s Gravity Barter Ltd. and M/s Oasis Cine Communication Ltd. and subsequent to amalgamation the assessee was allotted shares of M/s Oasis Cine Communication Ltd. on 04.02.2012. Hence, the allotment of 35,200 equity shares of M/s Oasis Cine Communicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of sale of shares in the absence of any material or other facts detected or brought on record by the AO that the assessee has brought back his own unaccounted money in the shape of long term capital gain and has used the same as a device to avoid tax, the purchase consideration paid by the assessee cannot be doubted in the absence of any corroborating evidence. The Assessing Officer has not disputed that the fair market value of the shares of M/s Gravity Barter Ltd. was more than the purchase price claimed by the assessee. It may be a case that ensuring merger/amalgamation of the said company with M/s Oasis Cine Communication Ltd. the assessee might have anticipant the exceptional appreciation in the share price due to extraordinary event of merger/ amalgamation. However, the same cannot be a reason for doubting genuineness of the transaction if the motive of purchase of the share is to earn an extraordinary gain because of some internal information available to the assessee. 7. In case of equity shares M/s Paridhi Properties Ltd. the assessee purchase 50,000 equity share on 26.03.2011 by paying share application money of ₹ 5 lacs which is duly reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share application money paid through bank account the assessee has brought his own unaccounted money back as long term capital gain. It is also pertinent to note that the shares of M/s Oasis Cine Communication Ltd. are still held by the assessee in its demat account to the extent of 17,200 shares and therefore, the holding of the shares by any parameter or stretch of imagination cannot be doubted. The AO has passed the assessment year based on the statement of Shri Deepak Patwari recorded by the Investigation Wing of Kolkata however, the assessee has specifically demanded the cross examination of Shri Deepak Patwari vide letter dated 15.03.2016 specifically in paras 3 and 4 as reproduced by the AO at page No. 7 of the assessment order as under:- 3. Since, the shares were allotted by the company through private placement after completing the formalities of ROC and were sold through the recognized Bombay Stock Exchage (BSE) there is no question of knowing individual persons or company official personally in the whole process, so the assessee is not in position to produce any one for cross examination before your good self. Since your good self has got the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 6. 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 untena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some in favour of the assessee and some may go against the assessee. But the probable factors have to be weighed on material facts so collected. Here in this case the material facts strongly indicate a probability that the wholesale buyers had collected the premium money for spending it on advertisement and other expenses and it was their liability as per their mutual understanding with the aseessee. Another very strong probable factor is that the entire scheme of 'twin branding' and collection of premium was so designed that assessee-company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that Assessee-Company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:- Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce Ind. Ltd., assessee's account with P.K. Agarwal co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant. In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account. In view of the above facts and circumstances when the assessee has produced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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