TMI Blog2019 (10) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... not to treat the long term capital gain as bogus and to allow the same and so, delete the consequential addition. Addition on account of unexplained expenditure incurred for earning the LTCG u/s. 69C - assessee s claim of LTCG, the consequential expenses incurred by the assessee in this regard is also allowed. - I.T.A. No. 303/Kol/2019 (Assessment Year: 2015-16) - - - Dated:- 23-8-2019 - Shri A. T. Varkey, JM For the Appellant Shri Subash Agarwal, Advocate For the Respondent Shri Sankar Halder, JCIT, Sr. DR ORDER Per Shri A.T. Varkey, JM This appeal filed by the assessee against the order of Ld. CIT(A)-10, Kolkata dated 31.01.2019 for AY 2015-16. 2. The first issue is in respect of ground nos. 1 and 2 of assessee s appeal is against the action of Ld. CIT(A) in confirming the addition made by the AO u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) in respect of long term capital gain arising from sale of shares of M/s. Sulabh Engineers Services Ltd. (M/s. SESL) and M/s. SRK Industries Ltd. (M/s. SRKIL) which was claimed by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the AO did not agree with the claim of the assessee and added the entire claim of ₹ 27,35,178/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of AO. Aggrieved, assessee is before us. 4. The Ld. AR assailing the action of the Ld. CIT(A) contended that the Ld. CIT(A) arbitrarily brushed aside all the documents produced by the assessee to substantiate the claim and has gone by the test of human probability to nix the claim of assessee, which is not legally sustainable, so he wants us to allow the claim of the assessee in this regard. Further the Ld. AR submits that the assessee has discharged the onus on him to show that the transaction is in the recognized stock exchange through recognized stock broker and on online platform and the shares were held in de mat account and sold through the banking channel. According to Ld. AR, there is no evidence/material to suggest that assessee had indulged in any activity as suggested by the AO to cause a doubt on the claim made by the assessee. According to Ld. AR, in the Investigation Report of the department is a general report and has nowhere indicted the assessee/b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell 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. SESL and M/s. SRKIL which resulted in LTCG of ₹ 2727,35,178/- and which was not allowed by AO and Ld CIT(A). 6. As discussed above, I note that the assessee has filed purchase contract note/bill placed at pages 11 and 15 of the paper book wherein I note that assessee had purchased 700 shares of M/s. SESL and 25000 shares of M/s. SRKIL and sold it which is evident from the sale contract note placed at pages 12 and 18 of the paper book respectively. I have also gone through the demat statement found placed at pages 13 to 14 and 19 to 25 of the paper book and bank statement which is found placed at pages 31 to 34 respectively of the paper book which shows that the purchase and sale consideration have passed through the banking channel. The AO has heavily relied on the modus operandi which has been brought out by the Investigation Wing of the Department and some SEBI studies. I find that there is no evidence/material to suggest that the aforesaid documents filed by the assessee are false or fab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the 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 Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have 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; Umach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their 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 remark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by broker s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. 19. Accordingly, we direct the A.O. to treat the gains arising out of the sale of shares under the head capital gains- Short Term or Long Term as the case may be. The other grievance of the assessee becomes infructuous. 11. 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 Coordinate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs. CIT [ITA No. 129 of 2012] (Cal HC) In this case the ld AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares 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 ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese facts, the appeal of the revenue was summarily dismissed by High Court. 12. I note that since the purchase and sale transactions 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) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 (Agra ITAT) (ii) ACIT vs. J. C. Agarwal HUF ITYA No. 32/Agr/2007 (Agra ITAT) 14. 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) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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