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TMI Blog2019 (8) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10(38) of the Act. According to AO, the assessee has bought 200 shares of M/s. Reward Agencies Pvt. Ltd. (M/s. RAPL) on 07.12.2010. The face value of these shares are Rs. 10/- each and assessee have purchased these shares at Rs. 500/- per share for a total investment of Rs. 1,00,000. On amalgamation of M/s. Reward Agencies Pvt. Ltd. with Quest Financial Services Ltd. the assessee was allotted 100 shares of Quest Financial Services Ltd. for every share of M/s. RAPL. Accordingly, the assessee became owner of 20000 shares of Quest Financial Services Ltd. on 20.01.2012. Thereafter the assessee had sold 20000 shares of M/s. QFSL on 22.02.2013 and 25.02.2013 at a total consideration of Rs. 17,19,881/-. The AO observed the scrip of named M/s. QFSL is in the list of Suspicious Transaction and, one of the reasons for scrutiny selection was to examine the suspicious transaction in penny stock, the nature and the circumstances of the transaction. The A.O. has relied upon the investigation report of DDIT (Inv.), Unit-2(3), Kolkata to disbelieve the assessee and has added the LTCG claim made by assessee as undisclosed income u/s. 68 of the Act. This action was confirmed by Ld. CIT(A). Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Reward Agencies Pvt. Ltd. purchased by assessee were originally issued to Sarover Dealers (P) Ltd. which is controlled by entry operator, Sri Prakash Jajodia. According to AO, it is evident that admissions made by Rajesh Kurmi, Dummy Director of RAPL and Prakash Jajodia, the entry operator, clearly indicate that the investments made by the assessee in RAPL and eventual sale of the shares of QUEST FINANCIAL SERVICES LTD for LTCG are noting but paper transactions in jamakharchi companies. Therefore, all the facts led the AO to come to a conclusion that the sale/purchase of the shares of M/s. QFSL made by the assessee is nothing but a sham transaction. The Ld. DR contended that only thereafter, the AO requested the assessee to show cause as to why the said sum of Rs. 16,19,881/- and Rs. 80,994/- not to be added in assessee's total income. In response the assessee submitted detailed explanation which was not satisfactory in the opinion of the AO. Therefore, the AO rejected the explanation of the on the basis of SIT Report and so, the AO did not accept the assessee's claim of LTCG and exemption thereof claimed by the assessee. Thereafter, the AO treated the same as cash credit u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad claimed exemption of the same u/s. 10(38) of the Act. I note that the assessee has bought 200 shares of M/s. Reward Agencies Pvt. Ltd. (M/s. RAPL) on 07.12.2010 (page 8PB). The face value of these shares are Rs. 10/- each and assessee have purchased these shares at Rs. 500/- per share for a total investment of Rs. 1,00,000. On amalgamation of M/s. Reward Agencies Pvt. Ltd. with Quest Financial Services Ltd. the assessee was allotted 100 shares of Quest Financial Services Ltd. for every share of M/s. RAPL. Accordingly, the assessee became owner of 20000 shares of Quest Financial Services Ltd. on 20.01.2012. Thereafter the assessee had sold 20000 shares of M/s. QFSL on 22.02.2013 and 25.02.2013 at a total consideration of Rs. 17,19,881/-. From a perusal of the purchase contract note/bill placed at page 8 of the paper book wherein I note that assessee had purchased 200 shares of (M/s. RAPL) on 07.12.2010 and sold it which is evident from the sale contract note placed at pages 35 to 36 of the paper book. I have also gone through the demat statement found placed at pages 39 to 40 of the paper book and bank statement which is found placed at pages 37 to 38 of the paper book which show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 instant case and thus the facts in the instant case are distinguishable. It was brought to my notice that the aforesaid order of ITAT, Mumbai, inter-alia, had been distinguished by Co-ordinate Benches of the Tribunal in the following cases: a. Kaushalya Agarwal vs. ITO [ITA No.194/Ko/2018, Order dt. 03.06.2019 (Kol, ITAT)] b. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) 2. Ritu Sanjay Mantry vs. ITO - ITA No.2003/Mum/2017, Order dt. 9th February, 2018 - ITAT Mumbai In this case is that was reopened by the AO on the basis of information received from office of DGIT (C&IB), New Delhi that the assessee had taken accommodation entry from M/s. Magasagar Securities Pvt. Ltd. (a company in the Mahasagar Securities Pvt. Ltd. group share scam case) of Rs. 10,32,289/-. Subsequently the assessment was completed u/s. 147 r.w.s. 143(3) of the Act after making an addition of Rs. 10,39,289/- on account of bogus share transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, the brief facts in this case was that the assessee purchased 2500 shares of Emrald Commercial Ltd. (ECl). The purchase was in cash. According to the AO since the purchase was made in cash, the same was not verifiable. Further, the A.O. found that said transaction was not through the stock exchange. The shares were in a nondescript company, with no financial and/or physical assets of value or reported earnings. The shares, purchased at an average rate of Rs. 21.70 per share in May 2004, went up to as much as from Rs. 465 to Rs. 489 in July, 2005, i.e., just over years' time. Each of these incidents matched with that which could be expected in a case of a transaction in a penny stock, the modus operandi of the transactions in which was also listed by the AO. Accordingly, relying on the decisions by the apex court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801/80 Taxman 89 (SC); Durga Prasad More v. CIT [1971] 182 ITR 540 (SC) and MC. Dowell & Co. Ltd. v. CTO [1985] 154 ITR 148/22 Taxman 11 (SC), besides by the Tribunal in the case of Asstt. CIT v. Som Nath Maini [2006] 7 SOT 202 (Chd.), he assessed the impugned credit of Rs. 12.15 lacs as unexplained income u/s. 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 taxmann.com 158 (Del-Trib) Reference is also made to the recent judgment dated 1st July, 2019 rendered by the Tribunal in the case of Aparna Misra vs. ITO [ITA No.161/KoIl2019] wherein the Tribunal had relied upon the Jurisdictional Calcutta High Court judgments, as mentioned hereinabove. 5. M. K. Rajeshwari vs. ITO [2018] 99 taxmann.com 339 - The Bangalore Tribunal noted the acts in this case as the assessee earned long-term capital gain on sale of shares of MARL and claimed exemption on it under section 10(38). The Assessing Officer relying upon the report of the investigation wing, SEBI report and findings/observations of the SIT, concluded that exemption under section 10(38) claimed by the assessee was not acceptable and the act of the assessee in purchasing the penny stock shares and sale of fee within the ambit of adventure in the nature of trade. Consequently, amount in question was liable to be taxed under the head 'business income'. The Tribunal confirmed the addition by observing that the department had brought sufficient material on record to demonstrate that unaccounted money was introduced in the books of account through long-term capital gain by adopting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee: a. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (Kol ITAT)] b. Kamal Singh Kundalia vs. ITO [ITA No.2359/Kol/2017, Order dt. 08.05.2019 (Kol ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) 8. Coming to the case of Chandan Gupta Vs. CIT (2015) 54 taxmann.com 10 (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 that the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares. The relevant observation is as under: " ..... On appreciation of the evidence, the Tribunal held that the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares. Once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee under Section 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained. 9. In view of the findings of fact recorded by the authorities below which could not be demonstrated to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse materials used against him. The matters in each of the said cases were set aside in the specific facts and circumstances of each of the cases were set aside in the specific facts and circumstances of each of the cases wherein all facts were not available on record and/or where in the words of the D/R the "AO has botched up enquiry". However, in the case in hand there is no occasion for setting aside the matter in as much as the assessee had furnished all relevant documents, materials and/or evidence to support its transactions of purchase and as well as sale of shares and the AO had failed to point out any defect and/or lacuna in the said documents, materials and/or evidence. Further, this Tribunal in its orders had decided similar issue in favour of the assessee by relying on binding judicial pronouncements. Reference is also made to the recent judgment dated 1st July, 2019 rendered by the Tribunal in the case of Aparna Miwsra, supra 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court, Order dt. 01.03.2018] Sourabh Khandelwal vs. PCIT [MP High Court, Order dt. 01.03.2018] It is noted that in all of these cases relates to imposition of penalty under section 271(1)(c) of the Act in the facts where the Assessee had withdrawn/surrendered his/her claim of exempt L TCG u/s. 10(38) of the Act and paid taxes on the gains arising from sale of shares. All these judgments are irrelevant and has no application to the facts of the instant case before the Tribunal. 13. Coming to the case of SEBI v. Rakhi Trading P. Ltd [Civil Appeal No.1969 of 2011, Judgment dated 8th February, 2018 (of the Hon'ble Supreme Court ) It is noted that the Hon'ble Supreme Court was concerned with a case where SEBI had initiated actions against few traders and brokers for violation of Regulations 3(a), (b) and (c) and 4 (1), (2)(a) and (b) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 ("the PFUTP Regulations"). In the said case, the Hon'ble Apex Court upheld the action initiated in the case of traders as the said traders have admitted of being involved in synchronized trad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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