TMI Blog2019 (10) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... As such, the transaction of the assessee was duly supported by relevant documentary evidences without there being any rebuttal by lower authorities; the addition made by the Assessing Officer by treating the LTCG as bogus is unsustainable Unexplained expenditure on commission - As transaction of long term capital gains derived by the assessee as genuine and as such, further addition made by the Assessing Officer on account of alleged commission is consequential and is also liable to be deleted - Decided in favour of assessee - ITA No. 1132/Del/2018 (Asstt. Year: 2014-15) - - - Dated:- 28-6-2019 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER Assessee by: Shri Salil Agarwal, Adv., Shri Shailesh Gupta, Adv. Department by: Shri S.S. Rana, CIT (DR) ORDER PER AMIT SHUKLA, J.M The aforesaid appeal has been filed by the assessee against the impugned order dated 19.12.2017, passed Ld. Commissioner of Income Tax (Appeals) 1, New Delhi for the quantum of assessment for the Assessment Year 2014-15. 2. Though the assessee had raised various groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ackground, assessee had claimed long term capital gain as exempt under section 10 (38) in the return of income to the tune of ₹ 1,93,56, 813/-. The assessee in the course of assessment proceedings submitted complete set of evidences of purchase of shares made by the assessee along with sale contract notes together with bank statements and Demat statements before the AO evidencing the entire transaction being routed through regular disclosed bank statement of the assessee. The aforesaid details as submitted by assessee before lower authorities are tabulated as under: Particulars Date of Investment 25.03.2012 No. of Shares purchased 20000 Purchase price per share ₹ 10 per share Total purchase consideration paid ₹ 2,00,000/- Date of shares sold 11.03.2014 (6000 shares) 14.03.2014 (600 shares) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to artificial increase. Further, the trend observed of TTL again lead to a conclusion that prices of the shares of TTL were artificially hiked to create non-genuine LTCG to the beneficiaries. 4.1 The Assessing Officer also observed that statements were also recorded by the Investigation Wing in other cases of various brokers, operators and entry providers, who accepted that TTL is a Penny Stock company and the scrip has been used to provide bogus LTCG to various beneficiaries. Reliance was placed by the Assessing Officer on the statement of Sri Vikrant Kayan, which was recorded on 09.06.2014 before DDIT (Inv), Kolkata in which he had admitted that the scrip of TTL was used to provide bogus LTCG to various beneficiaries. Thereafter, the Assessing Officer after explaining the modus operandi of bogus LTCG held that the transaction of the assessee was a sham transaction and the LTCG so declared of a sum of ₹ 1,93,56,813/- was nothing but unexplained Cash Credit under section 68 of the Act to be taxed @30% under section 115BBE of the Income Tax Act, 1961 in the hands of the assessee. 5. In the first appeal filed by the assessee, the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 140 Copy of Assessee s bank statement showing payment regarding purchase and sale of shares. 141-142 Copy of information about merger of M/s Trinity Trade Link Ltd. 143-144 7. The ld Counsel further submitted that the reasons given by AO as well as the Commissioner of Income Tax (Appeals) that increase in the price of TTL was without any backing of the Financial Results is factually incorrect, as the said company TTL is a growing company having turnovers of ₹ 117.39 crores (AY 2014-15); ₹ 150.59 crores (AY 2015-16); ₹ 154.88 crores (AY 2016-17); and ₹ 146.23 crores (AY 2017-18). He submitted that the TTL is a dividend paying company and the financial statements of said company are available in public domain, which have also been placed at Pages 325 to 370 of PB II. He further submitted that reliance placed by AO on the interim order of SEBI, wherein, trading in securities of TTL were suspended temporarily is misconceived, as vide Adjudication Order dated 31.10.2018, SEBI has found no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support the genuineness of the LTCG claimed as exempt under section 10(38), hence, addition cannot be made in the hands of assessee without rebutting the documentary evidences and without conducting investigation to discard the said documents. The case laws so relied by assessee are tabulated below: Copy of judgment of Hon ble Punjab and Haryana High Court in the case of PCIT vs Prem Pal Gandhi in ITA No. 95/2017 dated 18.01.2018. Copy of judgment of Hon ble Punjab and Haryana High Court in the case of PCIT vs Hitesh Gandhi in ITA No. 18/2017 dated 16.02.2017. Copy of judgment of Hon ble Bombay High Court in the case of CIT v. Shyam R. Pawar reported in 229 Taxman 256 dated 10.12.2014. Copy of judgment of Hon ble Bombay High Court in the case of CIT CIT v. Smt. Jamnadevi Agrawal reported in 328 ITR 656 dated 23.09.2010. Copy of judgment of Hon ble Gujarat High Court in the case of CIT vs. Maheshchandra G. Vakil reported in 220 Taxman 166 (Magz) dated 25.09.2012. Copy of judgment of Hon ble Rajasthan High Court in the case of CIT vs. Smt Sumitra Devi reported in 229 Taxman 67 dated 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Ms. Swati Mall vs ITO in ITA No. 2423/ Kol/2017 dated 07.12.2018. Copy of final adjudication order dated 31.10.2018 passed by SEBI in the matter of M/s Trinity Tradelinks Ltd. Copy of financial statements of M/s Trinity Tradelinks Ltd. for the financial year 2013-14 available in public domain. Copy of relevant extracts of financial statements of M/s Trinity Tradelinks Ltd. for the financial year 2014-15 available in public domain. Copy of relevant extracts of financial statements of M/s Trinity Tradelinks Ltd. for the financial year 2015-16 available in public domain. Copy of relevant extracts of financial statements of M/s Trinity Tradelinks Ltd. for the financial year 2016-17 available in public domain. 9. On the other hand, the Ld. CIT DR relied on the orders of the lower authorities and filed written submissions dated 16.05.2019, wherein, his main plank of arguments were as under: (i) The assessee purchased and sold shares of TTL. In statement of Sh. Vikrant Kayan, Managing Director of TTL, he admitted that he was mainly engaged in facilitating accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted his arguments, which can be summarized as below: (i) That the ld. DR is factually incorrect on various aspects, as firstly, the transaction of assessee is duly through DMAT and all the said documentary evidences are placed at pages 126 to 134 of PB I. (ii) That secondly, notice u/s 133(6) issued to M/s Trustline Securities Ltd. was duly complied as can be seen from page 6 of AO s order and thus, the submission of ld. DR that the share broker failed to comply is factually incorrect and contrary to material available on record. (iii) Further, the submission of ld. DR that the assessee has not been able to establish the source of cash of ₹ 2,00,000/- for purchase of shares is again factually incorrect, as the shares were purchased through account payee cheque (see bank statement at page 141 of PB I) and even in the statement of assessee recorded during the course of assessment proceedings, it was stated by the assessee that the payment for purchase of shares of TTL have been made through account payee cheque, which has also not been disputed by AO. (iv) That the ld DR is again factually incorrect in stating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butted by ld. DR. (viii) As far as, Annexure A and B so submitted by ld CIT DR, he submitted that ld DR has himself admitted that Annexure B is not relevant to the case of assessee, as nowhere, the name of assessee is appearing in the said annexure. However, a perusal of Annexure A, reveals that it is nothing but the list of shareholders as 07.02.2014 of STFL/ TTL. A close perusal of the said annexure will show that name of Sh. Vikrant Kayan is also appearing in the same at page 1. Thus, the submission of assessee was that the said annexure merely contains the list of shareholding as why will Vikrant Kayan mention his own name in the list of beneficiaries of accommodation entries. Rather, on reading of the said annexure, it becomes clear that the same is not containing the list of beneficiaries; it merely contains the list of shareholding, which is also available in public domain as TTL is a listed company. Thus, Annexure A so relied by ld. DR rather supports the case of assessee, as the same shows at page 13 that assessee was a genuine investor in TTL and was holding 0.08% of shareholding of TTL. Decision 12. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investigation report of the Kolkata Investigation Wing and the statement of Sh. Vikrant Kayan. On going through the record, we find that the statement of Sh. Vikrant Kayan was provided to the assessee at the fag end of assessment, i.e., on 27.12.2016 and immediately thereafter the assessee vide reply dated 28.12.2016 had sought for the cross examination of Sh. Vikrant Kayan, which could not be provided to the assessee. The said issue of cross examination was also raised before ld CIT (A) vide submission dated 02.08.2017, which was accepted by ld CIT (A), wherein, the matter was remanded to the file of AO for providing opportunity of cross examination to the assessee. However, ld. AO in his remand report dated 15.11.2017 showed his inability to summon Sh. Vikrant Kayan and requested ld. CIT (A) to issue commission and ensure presence of Sh. Vikrant Kayan. The ld. CIT (A) thereafter, did not issue commission nor provided any opportunity of cross examination of the so called alleged entry operator to the assessee. Rather, we find that the ld. CIT (A) at page 27 of his order records that there is no requirement to provide cross examination of Sh. Vikrant Kayan to assessee. Thus, afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciaries, then, there is no mention about the assessee in that list. Thus, we find that nowhere, the lower authorities or ld DR have been able to substantiate their allegation that the assessee is beneficiary of alleged accommodation entries from TTL. Rather, the documents so supplied by Revenue, supports the case of assessee and corroborates the fact that the assessee was a genuine investor and as a consequence of long term capital gain so declared is also genuine. 16. That the ld CIT DR during the course of hearing had placed heavy reliance on judgment of Hon ble High Court of Delhi in the case of Udit Kalra vs ITO in ITA No. 220/2019. Relevant extracts of said judgment for sake of ready reference are extracted below: The assessee is aggrieved by the concurrent findings of the tax authorities including the lower appellate authorities rejecting its claim for a long term capital gain reported by it, to the tune of ₹ 13,33,956/- and ₹ 14,34,501/- in respect of 4,000 shares of M/s Kappac Pharma Ltd. The assessee held those shares for approximately 19 months; the acquisition price was ₹ 12/- per share whereas the market price of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Udit Kalra vs ITO (supra) is distinguishable as in that case the company was into consistent losses, whereas, the scrip in which assessee has dealt is a growing and high turnover company and dividend paying company. As TTL was having turnovers of ₹ 117.39 crores (AY 2014-15); ₹ 150.59 crores (AY 2015-16); ₹ 154.88 crores (AY 2016-17); and ₹ 146. 23 crores (AY 2017-18). The financial statements of said company are available in public domain, which have also been placed at Pages 325 to 370 of PB II by assessee. That further, the interim order of SEBI in the case of TTL banning trading has been uplifted and cooled down by subsequent order of SEBI vide order dated 31.10.2018 placed before us at Pages 305 to 324 of PB II by assessee. Thus, the growth in prices of TTL was backed by sound financials and as such, the case of Udit Kalra vs ITO relied by ld. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Thus, we hold that the case of assessee is factually and materially distinguishable from the facts of the case of Udit Kalra vs ITO so relied by ld. DR. 18. Lastly, we deem it appropriate to consider the wri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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