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2019 (11) TMI 402

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..... and source of the transaction and huge profit in all shares traded by the assessee against the human probability, in our opinion, the Ld. CIT(A) has rightly confirmed the addition in dispute, which does not require any interference on our part - Decided against assessee - ITA No.1704/Del/2019 And ITA No.1705/Del/2019 - Dated:- 6-9-2019 - SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI K.N. CHARY, JUDICIAL MEMBER For The Assessee : Shri R.K. Gaur, CA For The Department : Shri N.K. Bansal, Sr. DR ORDER PER O.P. KANT, A.M.: These appeals by the respective assessees are directed against two separate orders, i.e., order dated 29/01/2019 in the case of Sh. Satish Kishore and order dated 28/01/2019 in the case of Sh. Naval Kishore, passed by the Ld. Commissioner of Income Tax (Appeals)-16, New Delhi [in short the Ld. CIT(A) ] for assessment year 2015-16. The issue in dispute involved in both the appeals being identical in similar set of circumstances, both the parties agreed to argue the case of Sh. Satish Kishore as lead case and result of the same to be followed in the case of Sh. Naval Kishore. Accordingly, both the cases were heard together and dispose off by way of this consolidated orde .....

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..... the head salary , income from house property , profit in case of the business of profession , capital gain and income from other sources . The long-term capital gain on sale of the shares amounting to ₹ 63,67,551/- was shown by the assessee as exempted under section 10(38) of the Income-tax Act, 1961 (in short the Act ). The case of the assessee was selected for scrutiny and during the course of scrutiny proceeding, the Assessing Officer noticed sale of following shares claimed under exempted long-term capital gain: Sl. No. Name of Shares No. of shares Date of purchase Cost of acquisition Sale consideration Capital Gain 1 Risa International 1200 15.01.2013 54,000.00 1,379,873.51 1,325,873.51 2 Pawansut Holding Ltd. 18000 21.02.2013 63,000.00 1,433,641.92 1,370,641.92 3 Tarang Project and consultant Ltd 450 15.05.2013 4,500.00 836,752.71 820,252.71 1200 13.07.2013 12,000.00 4 Suchak Trading Ltd 6000 15.11.2013 18,000.00 993,748.53 975,748.53 5 TTK Prestige Ltd 270 01.04.2009 24,300.00 1,922,735.21 1,875,035.21 260 15.04.2009 23,400.00 Total 27380 199,200.00 6,566,751.88 6,367,551.88 3.1 The Assessing Officer was in possession of information from the Investigation Wing of Inco .....

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..... The statement of banks through which sale proceeds have been realized. 3.3 The contention of the assessee that assessee fulfils all the requirement of section 10(38) as shares was purchased in cash and converted from physical to de-mat prior to sale and sales have been made through stock exchange by paying STT. According to the assessee, the allegation of Investigation Wing of Kolkata, were general in nature and not specific that assessee was engaged in obtaining accommodation entry. 3.4 The learned Assessing Officer rejected the claim of the assessee observing that in normal course it was not possible to have such huge profit in view of the facts that the assessee was a casual investor and all the shares were purchased in cash and dematerialized only prior to sale. He also observed that the assessee was not even aware of the location of the companies and their directors. According to the Assessing Officer, the transactions were carried out to give the shares a colour of longterm asset and the transactions were made beyond any human probabilities. The Assessing Officer, relying on the decision of the Hon ble Supreme Court in the case of Sumati Dayal Vs. CIT 214 ITR 801, wherein the .....

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..... e Bombay stock exchange from time to time. The Ld. CIT(A) also pointed out that as a part of surveillance measure, the Bombay stock exchange has categorized Pawansut Holding as an XT category, where a cross trade occurred when a broker executed an order to buy and sell the same security at the same time, in which both the buyer and the seller are clients of the broker. The Ld. CIT(A) has reproduced the surveillance notice issued by the BSE in the impugned order. Similarly, she has observed that trading in the scrip Suchak Trading Ltd. was also suspended by the BSE during January 2015. Ld. CIT(A) also observed that the assessee sold shares through SMC Global Securities and VP Consultant Ltd., i.e., the concerns which have been claimed by the sub-broker Sh. Pawan Kalyan as part of accommodation entry providing syndicate. The purchase of the shares in cash has been shown from brokers and not from the respective companies. In the case of scrip Riya International Ltd , even no evidence of the purchase were submitted before either Assessing Officer or before the Ld. CIT(A). The Ld. CIT(A) also referred to the statement of the assessee recorded on oath where he explained that he was a cas .....

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..... that the graphical representation by the Ld. Assessing Officer is a postmortem analysis, which does not validate the hypothesis. He referred to News reported in financial express dated 24/07/2019 about loss suffered by the investors in share trading and submitted that no human preponderance or perception can explain the said loss. 4.3 The Ld. counsel admitted that no doubt such kind of dubious practices are rampant but merely because there is an acknowledgement of such practices, would not mean that in any such cases coming before the court, the court has to presume that the assessee in question also indulged in that practice. The Ld. counsel submitted that an innocent person cannot be fastened with liability without cogent evidences. The Ld. counsel in support of the contentions relied on the decision of the Hon ble Delhi High Court in the case of CIT Vs Gangeshwari Metals Private Limited (2013) 30 taxmann.com 328 ( Delhi). 4.4 The Ld. counsel further submitted that assessee has discharged its burden of providing documentary evidence to support the long-term capital gain by submitting contract notes from brokers, de-mat account, broker statement of the account, proof of STT payme .....

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..... mp; Harvana)/[2012] 247 CTR 468 (Punjab & Haryana) (Copy Enclosed) 10. Usha Chandresh Shah Vs ITO [2014]-TIQL-1459-ITAT-MUM1 (Copy Enclosed) 11. Ratnakar M Puiari Vs ITO [2016-TIQL-1746-ITAT-MUM] (Copy Enclosed) 12. Arvind M Kariva Vs ACIT (ITA No. 7024/Mum/2010 13. Hon ble ITAT Mumbai in the case of ITO Vs Shamim M Bharwani (2016) (69 Taxmann.com 65) 5.1 The Ld. DR also provided a copy of statement of the brokers referred by the Assessing Officer in the assessment order, a copy of which was also provided to the Ld. counsel of the assessee. The Ld. DR referred to the statement dated 30/03/2015 of Sh. Pawan Kumar Kayan under section 132(4) of the Act during search and seizure action at his premises and submitted that he admitted of having engaged in providing accommodation entry in the form of LTCG through his concern including PKC Commodities Ltd., a sub-broker of SMC Global Securities Ltd. 6. We have heard the rival submissions and perused the relevant material on record, including the judicial decisions relied upon by both the parties. We find that in the instant case the issue in dispute is whether the long-term capital gain on sale of shares by the assessee is an arranged a .....

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..... P Consultant Ltd. One of the entry operators, Sh Pwan Kayan from Kolkata in his statement on oath, has admitted that M/s. SMC Global Securities was part of accommodation entry syndicate providing accommodation entries. (vii) The trading in most of the shares dealt by the assessee was suspended by the stock exchange due to abnormal behaviour of trading of shares. 6.3 We have also perused the evidences of purchases of shares by the assessee submitted in the paper book. On perusal of page 4 of the paper book we find that Shivam Trading Company has issued a debit note to the assessee for sale of 18,000 shares of Pawansut Holding Ltd., but in this debit note the serial numbers of the shares transferred to the assessee is not mentioned. Similarly, on page 5 of the paper book a copy of the debit note issued by Fair Finwiz is available, according to which assessee was sold 450 shares of Tarang Projects and Consultant Limited. Similar, debit notes have been filed by the assessee in the paper book to substantiate the purchase as genuine transaction. But the assessee has not filed any receipt of cash paid either to the brokers or to the companies. 6.4 When the documentary evidence containing .....

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..... to the extent of purchasing the winning ticket after the event presumably with unaccounted funds. The facts and circumstances in the instant case are also identical and in normal circumstances it was not possible to earn a huge profit from investment in all the scrips purchased by the assessee, unless obtaining long-term capital gain through accommodation entry providers. 6.6 Regarding the contention of the Ld. counsel that assessee was not having any control over the buyer of the shares and it was a transaction in uncontrolled manner on the stock exchange, we note that the investigation carried out by the Department has brought the facts on record that the shares prices have been manipulated artificially, which purchased by a set of accommodation entry provider companies controlled by cartel of brokers, entry operator etc., thus, in such circumstances, to say that sale transactions on the stock exchange were made in uncontrolled manner, will be on only an idealistic view and away from the reality of the market. The Ld. Counsel has himself accepted this fact that such types of dubious practices were rampant during relevant period. The contention of the Ld. counsel that sale transac .....

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..... on 07/06/2005 and 800 shares on 20/06/2005 at the rate of 485.65. The authorities held that the assessee had not tendered cogent evidence to explain as how the shares in an unknown company with worth ₹ 5 had jumped to ₹ 485 in no time. In view of the facts, the Hon ble Bombay High Court confirmed the addition. 6.10 In the case of MK Rajeshwari Vs. ITO (Supra), the coordinate bench of the Tribunal has held that while dealing the issue of long-term capital gain accrued to the assessee, one has to examine the financials of the company whose shares were inflated within a short period and after the sharp rise in the price of shares, it again comes down. 6.11 The coordinate bench of the Tribunal in the case of Shamim M. Bharwani (supra) held that, where the assessee claimed income earned from sale of shares is exempt under section 10(38), in view of the fact that purchase transaction of said shares was not recorded in the stock exchange and moreover, selling rates were artificially high later on with no real buyers, Assessing Officer rightly rejected assesses claim and added amount in question to his taxable income under section 68 of the Act. 6.12 As far as contention of the .....

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