TMI Blog2019 (8) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... vance of assessee is against the action of Ld. CIT(A) in confirming the addition made by AO u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) in respect to the Long Term Capital Gains (LTCG) claim of assessee in respect of sale consideration from shares of M/s. SRK Industries Ltd. (in short M/s. SRK) and commission added of ₹ 5340/- on it. 3. The brief facts is that AO noted that the assessee has shown LTCG of ₹ 10,68,061/- and claimed the same as exempt u/s. 10(38) of the Act. The assessee was asked to file complete details as well as evidences with respect to such claim of exempt income. In reply, the assessee filed copy of contract notes in support of purchase and sale of shares of M/s. SRK on which LTCG was claimed. From the details/evidences the AO found that 5994 shares of the company was purchased for ₹ 13,500/- on 08.08.2012 and just after completion of one year, it was sold for ₹ 10,82,212/- on 25.10.2013 and 11.11.2013. Thus according to AO the assessee has managed an increase in profit of almost 7916% in a short span of time of 14-16 months and that too when the general market trend was recessive during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld AR, in the instant case, the assessee is not connected with M/s. SRK amalgamated company or their promoters, directors and any other person who exercises any control over M/s. SRK/ amalgamated company or any so called entry operator. As a matter of fact, the assessee has never indulged in any such activity nor has been part of any modus operandi as stated by the A.O. The assessee has transacted in the shares of M/s. SRK/amalgamated company in the normal course of investment like millions of investors do in the stock market. Therefore, the question of alleged conversion of unaccounted money in the form of alleged bogus long term capital gains with the help of many alleged connected parties through price rigging and price manipulations does not arise. According to him, there is no material evidence for the A.O. to conclude what is apparent is not real. In the absence of any link between the assessee and the alleged admissions of the directors and brokers, human probability is being used as a vague and convenient medium for the Departments conjectures. Blaming the assessee by vague observations and drawing an adverse inference without any admissible evidence on record, on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has taken advantage of the price rise in an open manner through the transaction conducted in the official online system, no adverse inference can be drawn against the assessee. According to Ld. AR, the AO/CIT(A) was not justified in invoking the provisions of section 68 of the Act in regard to the sale proceeds of shares. According to Ld. AR, there is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker. The assessee produced all evidences to explain the source of the amounts received by the assessee from the brokers. The AO was not justified in assessing the sale proceeds of shares as undisclosed income. He also submitted that in respect of share of M/s. SRK the Coordinate bench of this Tribunal has already accepted the scrip of M/s. SRK vide its order dated 15.02.2019 in the case of Shri Vivek Jhunjhunwala Vs. ITO in ITA No. 2333/Kol/2018 for AY 2014-15. Therefore, he humbly prayed before the bench that the appeal of the assessee may please be allowed. 5. Per contra, the Ld. DR supported the order of Ld. CIT(A) and AO and according to him, the investigation report of department has shown that assessees w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twelve to fourteen months rigs/artificially inflated the price wherein pre-arranged companies to whom assessee s cash is delivered, which in-turn then purchases the shares of M/s. SRK at a very high price thus the assessee earns huge LTCG which the assessee later claims to be exempt income. According to AO, the modus operandi as suggested above has been revealed after in depth study by the Investigation Wing of the Department as well as by other agencies like SEBI etc. Even though the assessee filed various details/documents/papers before the AO to show that purchase and sale of share scrips of M/s. SRK which resulted in LTCG claim and which was not allowed by AO and Ld CIT(A). 8. I note that the assessee has filed purchase bill, bank statement showing the transaction in respect of purchase of shares, copy of amalgamation letter, contract notes of sale of shares, bank statement showing the transaction in respect of sale of shares, copy of demat statement etc. which are available at paper book pages 12 to 23 to support his claim. The AO has heavily relied on the modus operandi which has been brought out by the Investigation Wing of the Department a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead to a conclusion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO merely on surmises and conjectures. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the AO. --Therefore, 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 12. The Co-ordinate Bench of Ahmedabad in ITA Nos. 501 502/Ahd/2016 had the occasion to consider a similar issue which was wherein the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir exfactory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony 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 cross-examination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins- Short Term or Long Term as the case may be. The other grievance of the assessee becomes infructuous. 13. The assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO in ITA No. 19/Kol/2014 dated 2.12.2016 and the decision by Hon ble Calcutta High court in PCIT Vs. BLB Cables Conductors Pvt. Ltd. in ITAT No. 78 of 2017 dated 19.06.2018 wherein all the transactions took place off market and the loss on commodity exchange was allowed in favour of assessee. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were stage managed. The Hon ble High Court held that the opinion of the AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld AO but he miserably failed to substantiate that. The High Court held that the transactions were at the prevailing price and therefore the suspicion of the AO was misplaced and not substantiated. iii)CIT V. Lakshmangarh Estate Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) In this case the Hon ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. iv) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) In this case the Hon ble Calcutta High Court held that the Assessing Officer doubted the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., and when the transactions of purchase of shares were accepted by the ld AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:- (i) Baijnath Agarwal vs. ACIT [2010] 40 SOT 475 (Agra (TM) (ii) ITO vs. Bibi Rani Bansal [2011] 44 SOT 500 (Agra) (TM) (iii) ITO vs. Ashok Kumar Bansal ITA No. 289/Agra/2009 (Agra ITAT) (iv) ACIT vs. Amita Agarwal Others ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (v) Rita Devi Others vs. DCIT IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (vi) Surya Prakash Toshniwal vs. ITO ITA No. 1213/Kol/2016 (Kol ITAT) (vii) Sunita Jain vs. ITO ITA No. 201 502/Ahd/2016 (Ahmedabad ITAT) (viii) Ms. Farrah Marker vs. ITO ITA No. 3801/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moreover it was submitted before me by ld AR that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in CSE. The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs. Amita Agarwal Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT [2006] 6 SOT 247 (Mum) 17. I note that the ld. D.R. had heavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 10,32,289/-. Subsequently the assessment was completed u/s. 147 r.w.s. 143(3) of the Act after making an addition of ₹ 10,39,289/- on account of bogus share transactions and ₹ 20,786/- being commission paid to the broker for arranging accommodation entries in the form of share transactions. The AO had given a finding that the assessee had taken entries from Mahasagar Securities Pvt. Ltd. involved in the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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 ₹ 21.70 per share in May 2004, went up to as much as from ₹ 465 to ₹ 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 ₹ 12.15 lacs as unexplained income u/s. 68 of the Act. The Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Further this judgment has been considered and distinguished by this Tribunal and other Benches of the Tribunal, inter-alia, in the following cases while allowing similar issue in favour of the 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following cases. I note that in these cases given below Mahendra Kumar Bhandari vs. ITO [Order dt. 06.04.2018] Aravind Kumar, Chennai vs. ITO [Order dt. 08.11.2018] Vikram Dughar, Chennai vs. ITO [Order dt. 13.11.2018] Sadhana, Bangalore vs. ITO [Order dt. 26.05.2017] Arun Kumar Bhaiya, New Delhi vs. ITO [Order dt. 30.08.2018] Natti Singh HUF, Jaipur vs. ACIT [Order dt. 31.10.2018] Vinod J. Sharma, Thane [Order dt. 28.10.2015] All the matters were set aside to the file of the AO for fresh consideration and/or to confront the Assessee with the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order has been considered by this Tribunal while deciding similar issue in favour of an assessee in the case of Kaushalya Agarwal Vs. ITO (ITA No. 194/Kol/2018, order dated 03.06.2019 (ITAT, Kol). More particularly, the judgment of Hon ble Bombay High Court in Sanjay Bimalchand Jain V. PCIUT, order dated 10.04.2017 (Bom HC) had been considered and distinguished by this Tribunal and other benches of the Tribunal, inter-alia, in the following cases: a. Satyanarayan Saria vs. ITO [ITA No.1224/Kol/2016, Order dt. 28.06.2019 (Kol ITAT)] b. Kaushalya Agarwal vs. ITO [ITA No.194/Kol/2018, Order dt. 03.06.2019 (Kol, ITAT)] c. Meenu Goel vs. ITO [2018] 94 taxmann.com 158 (Del-Trib) 12. Coming to the cases given below: ACIT vs. Madhuri Sunil Kotecha [ITAT, Pune, Order dt. 28.03.2018] Charu Agarwal, Meerut vs. ITO [ITAT, Delhi, Order dt. 10.09.2018] Dayaram Khandelwal vs. PCIT [MP 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 case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KoI/2018, Order dated 05.10.2018. viii. U.C.Choudhary Ors (HUF) v. ITO in ITA No.1217/KoI/2018, Order dated 05.10.2018. ix. Virendara Barmecha v. ITO in ITA No.1201/KoI/2018, Order dated 05.10.2018. x. Taruna Devi Barmecha v. ITO in ITA No.1199/KoI/2018, Order dt. 05.10.2018. xi. Premlata Agarwal vs. ITO in ITA No.874/KoI/2018, Order dt. 05.10.2018. xii. Sunil Kumar Ladha vs. ITO in ITA No.851/KoI/2018, Order dt.05.10.2018. xiii. Balram Gupta vs. ITO in ITA No.817/KoI/2018, Order dt.05.10.2018. xiv. Alka Changoiwala vs. ITO in ITA No.634/KoI/2018, Order dt.05.10.2018. xv. Santosh Choraria vs. ITO in ITA NO.521/KoI/2018, Order dt.05.10.2018. xvi. Sonal Bajaj vs. ITO in ITA No.239/KoI/2018, Order dt.05.10.2018. xvii. Sudha Khandelwal v. ITO in ITA No.86/KoI/2018, Order dt. 05.10.2018. xviii. Bina Agarwal vs. ITO in ITA NO.1403/KoI/2018, Order dt.05.1 0.2018. xix. Harish Jain vs. ITO in ITA No. 1404/Ko1/2018, Order dt.05.10.2018. Thus, it is noted that aforesaid dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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