TMI Blog2019 (8) TMI 1321X X X X Extracts X X X X X X X X Extracts X X X X ..... nels 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. 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 the statement of Shri Sunil Dokania furnished to assessee, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee (Reliance on Hon ble Supreme Court decision in Andaman Timber [ 2015 (10) TMI 442 - SUPREME COURT] and in the light of the documents to substantiate the claim of LTCG, which has not been found fault with by the AO. - Decided in favour of assessee - I.T.A. No. 2387/Kol/2018 - - - Dated:- 23-8-2019 - Shri A. T. Varkey, JM For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tribunal. 4. I have heard rival submissions and gone through the facts and circumstances of the case. At the time of hearing it was brought to my notice by the Ld. AR that 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 BaidVs. 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. 5. On the other hand, the Ld. DR for the Revenue vehemently opposed the contentions of the assessee and took us through the AO s order and Ld. CIT(A) order and submitted that scrips of M/s. KAFL was artificially rigged to provide LTCG to the assessee which cannot be allowed and supported the impugned order and relied on the order of Hon ble Bombay High Court in the case of Binod Chand Jain in Tax Appeal No.18 of 2017 and 23 case laws which I will deal infra and therefore does not want me to interfere 6. I note that similar issue arose in Manish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Stock Broking Ltd was not the primary allottees of shares either in CPAL or in KAFL as could be evident from the SEBI s order. We find that the SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd s name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI s order heavily relied upon by the ld AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 25,000/- through account payee cheque to M/s. Shivshakti Exports Pvt. Ltd (purchase bill available at paper book pages 17 and copy of Bank statement showing payments made for purchase of shares found placed at pages 25 of paper book). The aforesaid 25,000 shares of M/s. Panchshul Marketing Ltd. were received in the DEMAT (page 18 of paper book). The said company (M/s. Panchshul Marketing Ltd.) was later merged with M/s. Kailash Auto Finance Ltd. as per the order of the Hon ble High Court of Allahabad dated 09.05.2013 and consequent to merger, the assessee had received 25,000 shares of M/s. KAFL. The assessee sold the said shares during the previous year relevant to assessment year under consideration and such sale was made in the Bombay Stock Exchange through M/s. Fortune Interfinance Ltd., a registered share and stock broker (contract note placed at pages 23-24 of Paper Book) after duly paying the Security Transaction Tax (STT). The sale consideration the assessee received by account payee cheque in its DCB Bank account which is evident from the bank statement filed before us at page 26-27 of the paper book. Therefore, the long term capital earned in the process has been clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Marketing Pvt Ltd, which is available at Page 18 of the paper book. Similarly at Pages 19 to 21 of the paper book, the appellant has enclosed copies of the demat statements reflecting the allotment of shares of KAFL upon giving effect to scheme of arrangement between KAFL and Panchshul Marketing Pvt Ltd and the subsequent transfer out of shares of KAFL in the month of sale i.e. April 2014. Hence the fact of holding the shares in the Demat account cannot be disputed. Therefore, once, the holding of shares is Demat account stands proved, then the transaction cannot be held as bogus. The AO has not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee, therefore, once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of report of Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. 11. Therefore, when the Assessing Officer has not brought any material on record to show that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile 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 under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. PawanPurohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. PawanPurohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all the material facts available on record does not help much. The AO has failed to prove through any independent inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 the statement of Shri Sunil Dokania furnished to assessee, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee (Reliance on Hon ble Supreme Court decision in Andaman Timber (supra) and in the light of the documents to substantiate the claim of LTCG, which has not been found fault with by the AO. 15. Let us look at certain judicial decisions on similar facts:- 16. The case of the assessee s is similar to the decision of Hon ble Bombay High Court, Nagpur Bench in CIT vs. Smt. Jamnadevi Agrawal Ors. dated 23rd September, 2010 reported in (2010) 328 ITR 656 wherein it was held that: The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary ITA Nos. 93 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 in support of their findings and have found that at the time of transactions, the broker in question was not banned by SEBI and that assessee had produced copies of purchase bills, contract number share certificate, application for transfer of share certificate to demat account along with copies of holding statement in demat account, balance sheet as on 31st March, 2003, sale bill, bank account, demat account and official report and quotations, of Calcutta Stock Exchange Association Ltd. on 23rd July, 2003. Therefore, 'the prese/itdppeal does not raise any question of law, much less any substantial question of law. 17. The Hon ble High Court of Punjab and Haryana in the case of Anupam Kapoor 299 ITR 0179 has held as under:- The Tribunal on the basis of the material on record, held that purchase contract note, contract note for sates, distinctive numbers of shares purchased and sold, copy of share certificates and the quotation of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri MukeshChoksi. 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/CIT(A). The Hon ble Supreme Court in the case of Andaman Timber Industries in Civil Appeal No. 4228 of 2006 was seized with the following action of the Tribunal:- 6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex factory prices remain static. Since we are not upholding and applying the ex factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders. 15. The Hon ble Apex Court held as under:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Cause. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 16. On the strength of the aforementioned decision of the Hon ble Supreme Court, the assessment order has to be quashed. 17. Even on facts of the case, the orders of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 21. Before I part, I would like to deal with the case laws cited by Ld. DR in revenue 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 instant case and thus the facts in the instant case are di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 27.03.2015 of Mumbai Triabunal, the brief facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. Satyanarayan Saria vs. ITO [ITA No.1224/Kol/2016, Order dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 para Nos. 27 and 28 of the order, reads as under .... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that is not the case here in the case in hand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 out by the Assessing Officer in the instant cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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/KoI/2018, Order dated 05.10.2018. ii. Jignesh Desai v. ITO in ITA No.1394/KoI/2018, Order dated 05.10.2018. iii. Rishab Jain v. ITO in ITA No.1392/KoI/2018, Order dated 05.10.2018. iv. Rekha Devi v. ITO in ITA NO.1269/KoI/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/KoI/2018, Order dated 05.10.2018. vii. Sneha Choudha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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