TMI Blog2019 (8) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... ere treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 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. Therefore, respectfully following the same and the facts in the instant case as taken note in para 7 supra and discussions, is inclined to set aside the order of Ld. CIT(A) and 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. - Decided in favour of assessee. - I.T.A. No. 2330/Kol/2018 - - - Dated:- 21-8-2019 - Shri A. T. Varkey, JM For the Appellant : Shri A. K. Tibrewal Shri Amit Agarwal, FCA For the Respondent : Shri Sankar Halder, JCIT, Sr. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 my notice that the assessee had purchased 32,000 equity shares of Panchshul Marketing Ltd. on 28.03.201₹ 2 from Brijdhara Mercantile Pvt. Ltd. M/s. Panchshul Marketing Ltd. was merged with M/s. KAFL and there was change of management and control of M/s. KAFL Ltd. pursuant to scheme to arrangement sanctioned by the Hon ble High Court at Allahabad. It was further submitted that the purchase of aforesaid 32,000 equity of M/s. Panchshul Marketing Ltd. was made by account payee cheque of ICICI Bank, vide cheque No. 945840. It was also submitted that shares of M/s. KAFL were allotted to the assessee upon merger of M/s. Panchshul Marketing Ltd. with M/s. KAFL pursuant to sanction of scheme of arrangement by the Hon ble Alla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such action should be considered as profit out of an adventure in the nature of trade and not from an investment. Therefore, it is submitted that, if the appeal of the assessee is upheld by the Hon'ble Bench for any reason, this alternative ground is put up for favour of your consideration. The AO considered the transaction as bogus and added the entire LTCG income u/s 68, so there was no occasion at that time to take an alternate ground for addition. In view of that, such transaction at best may be considered as an adventure in the nature of trade . According to him, in the case of Sanjay Bimalchand Jain[2018] 89 taxmann.com 196 (Bombay), the assessee purchased large number of shares of two penny stock companies at a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the lower authorities apart from placing the copy of SEBI s interim order supra. We find that the SEBI s orders relied on by the ld AO and referred to him as direct evidence against the assessee did not contain the name of the assessee and/or the name of Ashika Stock Broking Ltd. through whom the assessee sold the shares of KAFL as a beneficiary to the alleged accommodation entries provided by the related entities / promoters / brokers / entry operators. In the instant case, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (merged with M/s. Kailash Auto Finance Ltd. [hereinafter M/s. KAFL] on 09.05.2013) for a consideration of ₹ 32,000/- from M/s. Brijdhara Mercantile Pvt. Ltd. M/s. Panchshul Marketing Ltd. was merged with M/s. KAFL and there was change of management and control of M/s. KAFL Ltd. pursuant to scheme to arrangement sanctioned by the Hon ble High Court at Allahabad. It is also noted that the purchase of aforesaid 32,000 equity of M/s. Panchshul Marketing Ltd. was made by account payee cheque of ICICI Bank, vide cheque No. 945840. It was also noted that shares of M/s. KAFL were allotted to the assessee upon merger of M/s. Panchshul Marketing Ltd. with M/s. KAFL pursuant to sanction of scheme of arrangement by the Hon ble Allahabad High Court and 32000 equity shares were allotted to the assessee in lieu of shareholding in Panchshul Marketing Ltd. It is clarified that off market transaction has not been prohibited and if carried out legally cannot be held to be bogus only on this count. It is further noted that the said shares were later sold at a price of ₹ 12,46,584/- in the Stock Exchange of Bombay, through SEBI registered stock broker SKP Securities Ltd. whose SEBI Regd. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange, the seller who sells his shares on the stock exchange does not know who purchases shares. It is noted that the shares are sold and bought in an electronic mode on the computers on-line by the brokers and there is also no direct contact at any level even between the brokers. It is noted that as and when any shares are offered for sale in the stock exchange platform, any one of the thousands of brokers registered with the stock exchange is at liberty to purchase it. As far as our understanding the selling broker does not even know who is the purchasing broker. This is how the SEBI keeps a strict control over the transactions taken place in recognized stock exchanges. Unless there is a evidence to show that there is a breach in the aforesaid process which fact has been unearthed by meticulous investigation, I am of the opinion that the unscrupulous actions of few players exploiting the loopholes of the Stock Exchange, if any, cannot be the basis to paint the entire sale/purchase of a scrip like that of M/s. KAFL as bogus without bringing out adverse material specifically against the assessee. 9. The fact of holding the shares in the D-mat account cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the amount has been explained and the transaction in respect of which the said amount 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. 13. Even assuming that the brokers may have done some manipulation then also the assessee cannot be held liable for the illegal action of the brokers when the entire transactions have been carried out through banking channels duly recorded in the Demat accounts with a Government depository and traded on the stock exchange unless specific evidence emerges that the assessee was in hand in gloves with the broker for committing the unscrupulous activity to launder his own money in the guise of LTCG. 14. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the,bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, yn the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TTJ (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished. 12. The Hon'ble High Court of Rajasthan in CIT vs. Smt. Pushpa Malpani - reported in (2011) 242 CTR (Raj.) 559; (2011) 49 DTR 312 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, 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 18. The Co-ordinate Bench of Ahmedabad in the case of Smt. Sunita Jalan Vs. ITO in ITA Nos. 501 502/Ahd/2016 dated 09.03.2017 had the occasion to consider a similar issue which was wherein the assessment was framed on the strength of the statement of a broker. The relevant part reads as under:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for which purpose it wanted to avail the opportunity of cross examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the crossexamination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. In view the above, we are of the opinion that if the testimony 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant part reads as under:- 4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-07 at ₹ 11/- and sold the same in the assessment year 2008-09 at ₹ 400/- per share. In the above case, namely, ITA 18-2017 also the assessee had purchased and sold the shares in the same assessment years. The AO in both the cases added the appreciation to the assessees' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessee's income from undisclosed sources. In ITA-18- 2017 also the CIT(Appeals) and the Tribunal held that the AO had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipt were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5. In these circumstances, following the judgment in ITA-18-2017, it must be held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as taken note in para 7 supra and discussions, is inclined to set aside the order of Ld. CIT(A) and 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. 22. Before I part, I would like to discuss the case laws relied upon by the Ld. DR. He also relied on 23 judicial pronouncements in his support. I note that the said judicial pronouncements are all distinguishable on facts as well as on law. The said decisions are dealt with herein below in seriatim as under: 1. Ratnakar M. Pujari vs. Assessee -ITA No.995/Mum/2012, Order dt. 3rd August, 2016 [AY 2006-07] -ITAT Mumbai In this case the ITAT, Mumbai Bench were considering a case where the purchases of shares were treated as bogus and sham transactions by the Revenue in the immediately preceding financial year 2005-06 and the said findings of the AO with respect to bogus and sham purchases were not challenged by the Assessee. In such facts of the case the Tribunal had treated the exempt long term capital gains arising on sales of shares as bogus and sham. However, there is no such finding of fact in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rayan Saria vs. ITO [ITA No.1224/KoIl2016, Order dt. 28.06.2019 (Kol ITAT)] b. Kaushalya Agarwal vs. ITO [ITA No.194/KoIl2018, Order dt. 03.06.2019 (Kol, ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) Reference is also made to the recent judgment dated 01.07.2019 rendered by this Tribunal in the case of Aparna Misra Vs. ITO (ITA No. 161/Kol/2019) wherein the Tribunal had relied upon the following jurisdictional Calcutta High Court judgments to decide similar issue in favour of the assessee. i) M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] ii) CIT vs. Lakshmangarh Estate Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) iii) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] iv) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] v) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] vi) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738-ITA No. 22 of 2009, Order dt. 29.4.09] 3) Coming to the case of ITO vs. Shamim M. Bharwani (2016) 69 taxmann.com (Mum ITAT), Order dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (Kol ITAT)] b. Anupama Garg vs. ITO [ITA NO.5971/0el/2018, Order dt. 12.12.2018 (Del, ITAT)] c. Radhika Garg. vs. ITO [ITA No.4738/0el/2018, Order dt. 01.01.2019 (Del-Trib) 4. Coming to the case of Vidya Reddy - ITA No.126/Chny/2017 - Chennai ITAT had disallowed the claim of exempt LTCG and had confirmed the addition made on the ground that the assessee has not placed any material before the lower authorities to prove that her transactions are genuine. The Tribunal observed She has also not placed any material to prove that her claim of exemption u/s. 10(38) is genuine and valid. However, in the case of the assessee company all relevant documents were furnished to support purchases as well as sale of shares. Further, the Chennai Tribunal had relied upon and followed the judgment of Hon ble Bombay High Court in Sanjay Bimalchand Jain Vs. PCIT, order dated 10.04.2017, which judgment has been considered and distinguished by Kolkata and other Benches of the Tribunal, inter-alia, in the following cases: a. Satyan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19, Order dt. 15.03.2019 (Kol ITAT)] 6. Coming to the case of Abhimanyu Soin [2018-TIOL-733-ITAT-CHD The Chandigarh Bench of Tribunal had confirmed the addition made by AO after observing that 11. The assessee has failed to prove that the purchase and sale transactions are genuine and could not even furnish and iota of evidence regarding the sale of shares ............. . However, in the case of the Assessee Company all relevant documents were furnished to support, and prove beyond all doubts, purchases and as well as sale of shares, which was evidently absent in that case, so is not applicable to case in hand. 7. Coming to the case of Balbir Chand Maini Vs. CIT (2011) 12 taxmann.com 276 (P H) The Hon ble Punjab Haryana High Court had confirmed the addition made by Assessing Officer on the basis of finding of fact by the Tribunal: 10. The Tribunal while adjudicating the issue against the assessee had recorded a finding of fact that the transaction of sale and purchase of shares of M/s. Ankur International Ltd., was not a genuine transaction, a part where of relevant to the present issue, mentioned in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2019 (Kol ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) 9. Coming to the case of CIT vs. Sunita Dhadda (Hon ble Supreme Court judgment dated 06.06.2018), it is noted that this judgment relied upon by the department has no application in the facts of the instant case. The contention of Ld. DR that matter should be set aside to AO for supplying the Assessee with Investigation Wing Report and statements of parties relied upon cannot be applied in each and every case. The assessee company had in the case in hand discharged the onus casted upon it to prove the claim of LTCG/STCL, then it was the bounden duty of the AO to bring out the falsity/fabrication/wrong doing if any on the part of assessee or confront the assessee with any material which is adverse against the assessee and to proceed in accordance to law i.e. in confronting with principle of Natural Justice without doing so, and when assessee placed all documentary evidences before the AO/Ld. CIT(A), the assessee cannot be again sent back before AO and the decision to send back to AO is decided when proper opportunity has not been given by AO during assessment stage and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009, Order dt. 29.4.09] 11. Coming to the cases given below Prem Jain vs. ITO [ITAT, Delhi, Order dt. 22.03.2018] Sanjay Bimalchand Jain vs. PCIT [2018] 89 taxmann.com 196 (Bom) The decisions of these cases had been relied upon by D/R to contend that gains from sale of shares should be assessed as Business income and not under the head Capital Gains . It is noted that the Learned D/R is trying to put forward a completely new argument which do not emanate out of the orders of the lower authorities and also from the records of the case and thus is not permissible to be raised as this stage. Even otherwise, the ITAT, Delhi Bench in Prem Jain (supra) had held when the facts of the case was that the Assessee had claimed the income from sale of shares to be assessed at business profits and not capital gains where there was short duration of holding of shares and lack of clarity in account books, sale and purchase of shares. In such facts of the case, it was held that profits from sale of shares would amount to business income and not short term capital gain. However, no such case had been made ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such admission by the Assessee in the instant case that it has involved in any price manipulation and/or any dubious tax planning. Moreover, the Hon'ble Apex Court had set aside the action initiated by SEBI in the case of brokers as there was no evidence on record to show involvement of the said brokers. Similarly in the instant cases the department had failed to bring on record any evidence whatsoever to show that the Assessee was involved in any price manipulations. Thus the judgment of the Hon'ble Supreme Court is clearly distinguishable on facts. The said judgment had been held to be distinguishable by the ITAT, Kolkata Benches in the following judgments:- i. Suman Saraf v. ITO in ITA No.1395/Kol/2018, Order dated 05.10.2018. ii. Jignesh Desai v. ITO in ITA No.1394/Kol/2018, Order dated 05.10.2018. iii. Rishab Jain v. ITO in ITA No.1392/Kol/2018, Order dated 05.10.2018. iv. Rekha Devi v. ITO in ITA NO.1269/Kol/2018, Order dated 05.10.2018. v. Sunita Devi v. ITO in ITA No. 1268/Ko1/2018, Order dated 05.10.2018. vi. Jagat Lal Jain v.ITO in ITA No.1226/Kol/2018, Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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