TMI Blog2018 (4) TMI 1839X X X X Extracts X X X X X X X X Extracts X X X X ..... gus. This issue in favour of the assessee and allow the claim of the assessee. The orders of the authorities below qua this issue are set aside. - Decided in favour of assessee. - ITA No. 288/JP/2017 - - - Dated:- 6-4-2018 - SHRI VIJAY PAL RAO, JM AND SHRI BHAGCHAND, AM For the Assessee : Shri S.L. Poddar (Advocate) For the Revenue : Shri Varinder Mehta (CIT) ORDER PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 29.03.2017 pertaining to A.Y. 2013-14. The assessee has raised the following revised grounds of appeal :- 1. Under the facts and circumstances of the case the learned CIT (A) has erred in confirming the addition of ₹ 49,14,686/- on account of the long term capital gain treating the same as undisclosed income of the assessee whereas the assessee has shown the long term capital gain income exempt u/s 10(38) of the Income Tax Act, 1961. 2. Under the facts and circumstances of the case the learned CIT (A) has erred in confirming the addition of ₹ 49,16,686/- without providing opportunity to the assessee for cross examination and rebutting the material collected at the back of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and bogus capital gain entry in the form of sale of shares of M/s. Luminaire Technologies Ltd. and accordingly the sale consideration of ₹ 49,14,686/- was added. The assessee challenged the action of the AO before ld. CIT (A) but could not succeed. 3. Before us, the ld. A/R of the assessee has submitted that the assessee purchased 10,000 shares of ₹ 10/- each of M/s. Paridhi Properties Ltd. on 11.3.2011 against the payment of ₹ 100,000/- by cheque which is duly reflected in the bank account of the assessee. The ld. A/R has referred to the bank statement at pages 1 to 4 of the paper book and submitted that the payment of ₹ 100,000/- has been recorded in the bank statement and, therefore, the transaction of purchase of shares against the consideration of ₹ 100,000/- is duly supported by the independent evidence. The ld. A/R has then referred to the allotment letter dated 21st March, 2011 of 10,000 shares by M/s. Paridhi Properties Ltd. placed at page 5 of the paper book. The assessee was, thereafter, issued share certificate having registered portfolio no. P000004 dated 19th March, 2011 at page 6 of the paper book. Subsequently, the assessee demate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries of bogus capital gains from the sale of shares including the shares of M/s. Luminaire Technologies Ltd. Undisputedly, the assessee has claimed long term capital gain from sale of shares of M/s. Luminaire Technologies Ltd. and further there is manifold increase in the price from the alleged cost of acquisition of ₹ 100,000/- to more than ₹ 49,00,000/- within a short span of period which shows that the transaction of sale of shares showing long term capital gain is not genuine but the assessee has obtained the accommodation entries from these operators. He has relied upon the orders of the authorities below. The ld. D/R has further submitted that the facts clearly show that the price of the script has been rigged and, therefore, the penny stock claimed to have been purchased at par was sold at a very high price which is not possible in normal course of transaction of purchase and sale of shares. 4. We have considered the rival submissions as well as the relevant material on record. The assessee purchased 10,000 shares of M/s. Paridhi Properties Ltd. on 11.3.2011 under private placement as these shares were issued by the company itself. The assessee paid the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the cost of acquisition, the actual purchase consideration can be doubted. But in the absence of any material brought on record by the AO to show that the assessee has brought its unaccounted income back in the shape of long term capital gain, it cannot be held merely on the basis of suspicion that the assessee has paid the difference amount of consideration in cash to convert its unaccounted income into tax free income in the shape of long term capital gain. The Hon ble Jurisdictional High Court in the case of CIT vs. Smt. Pooja Agarwal and Shri Jitendra Kumar Agarwal (supra) while dealing with an identical issue has held in para 12 as under :- 12. However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:- Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appraisal report and appraisal report is made by the Investing Wing after considering all thematerial facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohi. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant. We further note that an identical issue was considered by the Coordinate Bench of this Tribunal in the case of Pramod Jain and Others vs. DCIT vide order dated 31st Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ever had any business transactions with the companies as mentioned below: 1. First Financial Services Ltd. (FFSL) 2. Splash Media and Infra Ltd. ( SPMIL) 3. D B (International) stock Brokers Ltd. ( DBSBL) 4. Unisys Softwares Holdings Industries Ltd. (USHL) 5. Fact Enterprises Ltd. ( FEL) 6. Parikh Herbal Ltd. ( now Safal Herbs Ltd) 7. Premier Capital Service 8. Rutron Internationa Ltd. 9. Radford Global Ltd 10. JMD Telefilms Industries Ltd 11. Dhanleela Investments Trading Co. Ltd. 12. SRK Industries Ltd. 13. Dhenu Buildcon Infra ltd. Ans. M/s Comfort Securities Ltd. has business nexus with the following companies Name of the Company Nature of Business Transaction 1. First Financial Services Ltd. Brokerage and Consultancy Services 2. Splash Media and Infra Ltd. Brokerage, Share Holding and Consultancy Services 3. Fact Enterprises Ltd Broking as well as share holding 4. Rutron International Ltd. Consultancy Services 5. D.B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 the assessee was holding 3,50,000 equity shares of M/s Rutron International Ltd. in D-mat account. This fact of holding the shares in the D-mat account as on 18.06.2012 cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is Dmat account cannot be disputed then the transaction cannot be held as bogus. The AO has not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee, therefore, once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Shri Anil Agrawal recorded by the Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee. Further, Shir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged its status from private limited to a public limited and fresh certificate was issued by the Registrar of company on 05.02.2011 which is placed at page 43 of the paper book. Therefore, there is no reason to disbelief the fact of fresh certificate issued by the Registrar of companies on 05.02.2011 and hence, the date mentioned in the order of the Hon ble Kolkata High Court as 18.04.2011 appears to be typographical mistake. Even otherwise these two dates do not have any effect on the genuineness of the transactions of purchase of equity shares by the assessee of M/s Gravity Barter Pvt. Ltd. The assessee though produced all the relevant records and evidences right from the purchase bills, certificate issued by the Registrar about the change of name, the communication between the assessee and the seller of the shares and thereafter, the amalgamation of M/s Gravity Barter Ltd. with M/s Oasis Cine Communication Ltd. which was duly approved by the Hon ble High Court vide order dated 28.8.2011. The assessee in the mean time got the physical share certificate dematerialized into Demat account on 16.02.2012. There is no reason to doubt the allotment of the shares to the assessee after ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been purchased against consideration paid in cash which is not in case of the assessee. The assessee has paid purchase consideration through cheque and therefore, even if the said consideration is found to be very less in comparison to the sale price at the time of sale of shares in the absence of any material or other facts detected or brought on record by the AO that the assessee has brought back his own unaccounted money in the shape of long term capital gain and has used the same as a device to avoid tax, the purchase consideration paid by the assessee cannot be doubted in the absence of any corroborating evidence. The Assessing Officer has not disputed that the fair market value of the shares of M/s Gravity Barter Ltd. was more than the purchase price claimed by the assessee. It may be a case that ensuring merger/amalgamation of the said company with M/s Oasis Cine Communication Ltd. the assessee might have anticipant the exceptional appreciation in the share price due to extraordinary event of merger/ amalgamation. However, the same cannot be a reason for doubting genuineness of the transaction if the motive of purchase of the share is to earn an extraordinary gain because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. As regards the purchase consideration when the assessee has shown the share application money paid through his bank account and the AO has not brought on record any material to show that apart from the share application money paid through bank account the assessee has brought his own unaccounted money back as long term capital gain. It is also pertinent to note that the shares of M/s Oasis Cine Communication Ltd. are still held by the assessee in its demat account to the extent of 17,200 shares and therefore, the holding of the shares by any parameter or stretch of imagination cannot be doubted. The AO has passed the assessment year based on the statement of Shri Deepak Patwari recorded by the Investigation Wing of Kolkata however, the assessee has specifically demanded the cross examination of Shri Deepak Patwari vide letter dated 15.03.2016 specifically in paras 3 and 4 as reproduced by the AO at page No. 7 of the assessment order as under:- 3. Since, the shares were allotted by the company through private placement after completing the formalities of ROC and were sold through the recognized Bombay Stock Exchage (BSE) there is no question of knowing individual persons or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Andaman Timber Industries vs. CCE (supra) while dealing with the issue has held in para 5 to 8 as under: 5. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; where there are many probable factors, some in favour of the assessee and some may go against the assessee. But the probable factors have to be weighed on material facts so collected. Here in this case the material facts strongly indicate a probability that the wholesale buyers had collected the premium money for spending it on advertisement and other expenses and it was their liability as per their mutual understanding with the aseessee. Another very strong probable factor is that the entire scheme of 'twin branding' and collection of premium was so designed that assessee-company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that Assessee-Company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Chu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:- Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce Ind. Ltd., assessee's account with P.K. Agarwal co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain (6 of 6) [ ITA-385/2011] made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant. In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account. Thus, it is clear that the Tribunal in the said case has analyzed an identical issue wherein the shares allotted in the private placement @ ₹ 10 at par of face value which were dematerialized an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term capital gain as bogus and consequential addition made to the total income of the assessee is not sustainable. Hence, we delete the addition made by the AO on this account. The facts in the case are identical to the extent that the shares were allotted in a private placement by the company at par which were dematerialized and thereafter sold by the assessee. The decision of Hon ble Jurisdictional High Court in the case of CIT vs. Smt. Pooja Agarwal was followed by the Coordinate Bench of this Tribunal in arriving to the conclusion that the transaction of sale of shares cannot be held as bogus when the shares were sold after the same were dematerialized and credited to the demat account of the assessee. The finding of the AO in the case of the assessee is based merely on suspicion and surmises without bringing any cogent material to establish that the assessee has introduced his unaccounted income in the shape of long term capital gain. Further, we note that the transaction in the case is not a trading of the shares through brokers but it was an allotment by the company in a private placement and thereafter the shares were dematerialized and duly reflected in the demat accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
