TMI Blog2019 (5) TMI 1694X X X X Extracts X X X X X X X X Extracts X X X X ..... ries no significance - Decided in favour of assessee. - ITA No. 729/Kol/2018 - - - Dated:- 15-5-2019 - Shri S.S, Godara, Judicial Member For the Appellant : Shri Dhiraj Lakhotia, A.R For the respondent : Shri C.J. Singh, JCIT-SR-DR ORDER This assessee s appeal for assessment year 2014-15 arises against the Commissioner of Income-tax (Appeals)-Siliguri s order dated 22.03.2018 passed in case No.69/CIT(A)/SLG/2016-17, involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. The assessee s sole substantive grievance raised in the instant appeal seeks to reverse both the lower authorities findings treating his Short Term Capital Loss (STCL) arising from sale of shares after payment of Security Transaction Tax (STT), amounting to ₹1,92,320/- as bogus unexplained cash credits. The CIT(A) s detailed discussion to this effect reads as under:- 4. Decision :- I have perused the Assessment Order, the Grounds of Appeal and the submissions made by the Ld.. A/R on behalf of the appellant. My observations findings are as under :- 4.1. The present appeal emanates after disallowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the statement of oath of Shri Rakes Ram Somani, one of the director of Eureka Stock and Shares Broking Services Limited recorded during the course of survey operation u/s 133A of the I. T. Act, 1961 conducted on 30.03.2015 at the business premises of Eureka Stock and Shares Broking Services Limited also confirms that the company provides transactions in bogus scrips/penny stocks through their broking house to these paper companies. In view of the findings as recorded by the Investigation Wing, you are being show caused to explain as to why the amount of ₹ 24,79,714/- invested in Global Infratech Finance Limited through Eureka Stock Share Broking Services Ltd. should not be treated as bogus and added back to the income as unexplained investment u/s 69 of the IT. Act, 1961. In response to the show cause notice, the assessee filed a submission explaining that the shares were purchased through Eureka Stock Share Broking Services Ltd. online and the payments were made through a/c payee cheques. Further, the assessee stated that the investment in the shares were made from advance against sale of flat which were also received through a/c payee cheques. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, Hon. Justice M.V. Shah (Retd.) and Hon. Justice Hari Das (Retd.) for necessary action by Enforcement Agency. The STCL of the assessee through transaction in the shares of Global Infratech Finance Ltd which is a penny stock is very much part of the wider seam operating in shadow economy highlighted by SIT. This confirms the finding of the A.O. that shares of this company were being manipulated in order to provide undue benefit to various persons. 4.5 The A.O. has clearly highlighted the Investigation Report of the DDIT, Unit- 2(3), Kolkata where in the name of the script Global Infratech Finance Ltd. figures prominently as one of the penny stock manipulated by brokers to provide LTCG/STCL. The A.O. has already highlighted that the number of entities involved in arranging this transaction were investigated by investigation wing, Kolkata through survey u/s 133A and recording of statement u/s 131. It has been pointed out by the A.O. that it has been admitted by a number of persons involved in running such entities of their role in arranging these share transaction. It has been revealed that the shares of Global Infratech Finance Ltd. have been used by different s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if not bona fide. The relevant part of the observation of the Hon'ble Supreme Court is reproduced hereunder: Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham or make believe. 4.9 Mumbai ITAT in the case of Ratnakar M. Pujari vs ITO in I.T.A. No.99 5/Mum/2012 where the facts of the case are identical to that in the present case, has held that- F) PENNY SHARE The shares in which the assessee has claimed to have made a deal, are identified as Penny Shares by the investigation wing of the department because rates of these shares are not based on business results of the companies but same are fluctuated by insider's trading from zero value (negligible price) to very high price and vice versa without any reason or basis to accomm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change are not of any help 10 the assessee for claiming the exemption as long term capital gains as the allegation of the Revenue is that the assessee has in collusion with the Brokers has manipulated and camouflaged the entire transactions of sale and purchase of shares in getting issued pre-dated contract notes for purchases of shares for which payments were also made for these purchase in cash and hence these purchases never existed at that relevant time. It is the allegation of the Revenue that the entire sale and purchase of shares were manipulated by the assessee in collusion with the brokers in order to earn tax free exempt long term capital gains on sales of shares u/s 10(38) of the Act whereby un-accounted cash of the assessee has been introduced in disguise in lieu of sale proceeds of shares. Keeping in view facts and circumstances of the case and as per our discussions and reasoning as set out above, we find no infirmity in the orders of the learned CIT(A) which we uphold and sustain. The assessee relied upon the decision of the ITAT, Hyderabad in the case of ITO v. Smt Aarti Mittal (2014) 41 taxmann.com 1/8(Hyd.-Trib) whereby the Tribunal has arrived at the decision tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions, going through the orders of authorities below and paper book. we find that M/s Ankur International Ltd, although it is a quoted company, its shares were not being transacted at Ludhiana Stock Exchange at, the relevant time. Shares have been purchased and sold through the brokers and payments have been received in cheque on different dates as per the statement of account of M/s SK. Sharma Co, Factual matrix of the case from start of the purchase of shares at the rate of ₹ 3 to the sale of shares at ₹ 55 in a short span of time and shares being not, quoted at Ludhiana Stock Exchange and the way in which different, instalment payments have been received from the brokers and non-availability of the records of the brokers and the shares remaining in the name of assessee even long after the sale of the shares does not stand the test of probabilities. As rightly pointed out by the learned Departmental Representative, these types of companies function in the capital market whose sale price is manipulated to astronomical height only to create the artificial transaction in the form of capital gain. Surrounding circumstances differ from the normal share market transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VDIS In the totality of facts and circumstances of this case and material on record, we are of the considered view that the CIT(A) was not justified in deleting the impugned addition. We, accordingly set aside the order of the CIT(A) and restore that of the AO. 4.11 While confirming the decision of ITAT Chandigarh Bench (SOMNATH MAINI vs. CIT, Hon'ble P H High Court has held as under- The assessee incurred capital loss on account of sale of gold jewellery and also had short-term capital gain of almost equal amount. The AO observed that short-term gain was not genuine inasmuch as assessee had purchased 45,000 shares of M/s Ankur International Ltd at varying rates from ₹ 2.06 to ₹ 3. f per share and sold them within a short span of six-seven months at the rate varying from ₹ 47.75 paise to ₹ 55. These shares were purchased through a broker, Munish Arora Co. and sold through another broker, M/s SK Sharma Co. The AO was taken by surprise by the astronomical rise in share price of a company from ₹ 3 to ₹ 55 and started further enquiry. The AO after enquiry made addition to the income of the assessee, which was upheld by the CIT(A) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be of a sum during the previous year; and the assessee offers no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression the assessee offers no explanation means where the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record Application of mind is the sine qua non for forming the opinion. In this case the Hon'ble Supreme Court has reversed the decision of the Hon'ble Madras High Court and upheld the findings of the lower authorities regarding the transactions of gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nish and supply information or confirm facts or even attend as witnesses. The Assessing Officer can also refer to incriminating material or evidence available with him and call upon the assessee to file their response. We cannot lay down or state a general or universal procedure or method which should be adopted by the assessing officer when verification of facts is required The manner and mode of conducting assessment proceedings has to be left to the discretion of the assessing officer, and the same should be just, fair and should not cause any harassment to the assessee or third persons form whom confirmation or verification is required The verification and investigation should be one with the least amount of intrusion, inconvenience or harassment especially to third parties, who may have entered into transactions with the assessee. The ultimate finding of the assessing officer should reflect due application or mind on the relevant facts and the decision should take into consideration the entire material, which is germane and which should not be ignored and exclude that which is irrelevant. Certain facts or aspects may be neutral and should be noted. These should not be ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then sale proceeds had to be added as income of assessee under section 68.s In case of Balbir Chand Maini Vs CIT (2011) 12 taxmann.com 276 (Punjab Haryana)/(2011) 201 Taxman 94 (Punjab Haryana) (MAF.)/[2012] 340 ITR 161 (Punjab Haryana)/[2012] 247 CTR 468 (Punjab Haryana) where in Section 69 of the Income Tax Act, 1961 is upheld. In this case in Assessment year 1998-99 ,the, Assessing Officer found that assessee had purchased certain shares of a company at rate between ₹ 2.50 and ₹ 3.40 per share in month of April, 1997 and part of those shares were sold through a broker at ₹ 55 per share - He came to opinion that value of said shares could not be as high as ₹ 55 per share-He recorded statement of broker who admitted to have purchased shares in question but failed to produce books of account and other relevant documents-He also found that alleged sale of shares had not taken place through any stock exchange-On scrutiny of books of account of broker, it was found that there were cash deposits in its bank account preceding issue of cheques in name of assessee for purchase of shares claimed to be sale proceeds of same shares received in advance-Broke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .7024/Mum/2010 dated 16.01.2013 and Hon'ble ITAT, Delhi Bench 98 ITD 285 in the case of M/s Napar Drugs Limited. All these cases are applicable to the facts and circumstances of the present case in which the various judicial authorities have decided the cases in favour of revenue after going through the entirety of the circumstances and not getting influenced by the picture shown by the appellant which is colored by the use of sham devices and layering of transactions. The case laws relied upon by the AR have been perused. It cannot be denied that the decisions in these cases are in favour of the assessee but it appears that the Hon'ble Tribunals/Courts which have passed these judgments have not been made aware of the entirety of the circumstances. Moreover, the fact that the assessees in these cases fail to clear the test of human probabilities, has not been brought to the knowledge of these judicial authorities. Therefore, these cases are not being found relevant in the present case where the AO has gone to the very root of the transactions after doing deep analysis of the facts and circumstances and after taking into account the various inputs available with him fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No.2477/Kol/2018 Mahavir Jhanwav vs. ITO decided on 01.02.2019 holds that such circumstantial carries no significance as under:- 5. After hearing both sides, I find that in a number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. Some of the cases were, detailed finding have been given on this issue, are listed below:- Sl. No ITA Nos. Name of the Assessee Date of order/ Judgment 1. ITA No.714 to 718/Kol/2011 ITAT, Kolkata DICT vs. Sunita Khemka 28.10.2015 2 214 ITR 244 Calcutta High Court CIT vs. Carbo Industrial Holdings Ltd. - 3. 250 ITR 539 CIT vs. Emerald Commercial Ltd. 23.03.2001 4. ITA No.1236-1237/KOl/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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