TMI Blog2021 (1) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... out any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. The order of the AO treating the long term capital gain as bogus and consequential addition made to the total income of the assessee is not sustainable. - Decided in favour of assessee. - I.T.A. No. 5544/Mum/2018, I.T.A. No. 5539/Mum/2018, I.T.A. No. 5542/Mum/2018, I.T.A. No. 5543/Mum/2018, I.T.A. No. 5540/Mum/2018 And I.T.A. No. 5541/Mum/2018 - - - Dated:- 6-1-2021 - Shri C. N. Prasad, JM And Shri S. Rifaur Rahman, AM For the Appellant : Ms. Ritu Kunal Kishor, AR For the Respondent : Ms. Shreekala Pardeshi, DR ORDER PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER: The present six (6) appeals have been filed by above said assessees against the consolidated order of Ld. Commissioner of Income Tax(Appeal) in short referred as Ld. CIT(A) , Thane, dated 31.08.2018 for Assessment Year (in short AY) 2015-16 respectively. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. First, we are taking ITA No. 5544/Mum/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. AO asked the assessee to submit the transactions in demat account and based on the details, notices u/s 133(6) were issued to the purchasers of these shares. The identity or credit worthiness of these purchasers were not submitted and the assessee took a plea that these transactions were executed through stock exchange. 6. The statement of the assessee were recorded u/s 131 of the Act by the AO in order to appreciate the facts and AO analyzed the statement and observed in his order that the notice issues to Bushit Trading Pvt Ltd returned unserved and the details of this company given by the assessee are not proper and as per the statement given by shri Jagdish Purohit under oath that Shri Eknath Mandavkar director of Bushit Trading is an entry operator. Therefore, AO came to the conclusion that assessee is having acquaintance with the entry provider. He observed tat another company involved in the transaction is Compass Distributor and assessee purchased the shares off the market by paying to the unknown company. Not only the assessee invested in the above share, his other family members also purchased the same. 7. When the detailed show cause notice was issued to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., Mumbai on BSE screen based platform on various dates. Following the sale of shares, the Broker issued contract notes cum Bills for sale of shares (copy submitted). The shares were transferred from Demat Account No. 1205220000007893 to the Broker's account, who then transferred to BSE. e) After transfer of shares from my Demat A/c to Broker's A/c, M/s. BHH Securities Pvt. Ltd., who received the payment from BSE, issued the cheques in my favour which were then deposited and realized in Saving A/c 27408. Copy of Bank pass book for 2014-15 is enclosed. f) From the series of above events, your goodself will appreciate that the transactions of purchase and sales of shares were genuine and the LTCG claimed is not bogus or accommodation entry, 4) Under Para No. 05.1 of SCN, the financial results of 'PS IT Infrastructure' for year ended 31-03-2012 31-03-2013 are mentioned but without comparing them with results for year end 31-03-2014 31-03-2015. The Annual reports of PS IT Infra far subsequents years are enclosed for your perusal : 31-03-2012 (from Notice) 31-03-2013 (from Notice) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany, it was engaged in the business of dealing in Computer Hardware and software (I.T. Sector) and. had good future potential. So our decision to invest in its shares was fully justified. The movement in share price was as per market sentiments. 5) Para 5.3 of SCN : The statements of Shri Sajjan Kedia, Jagdish Purohit and Anuj Agrawal have been recorded at the back of the assessee. His name is not mentioned any where in those statements. The assessee has never met the above persons and has no knowledge of the dummy directors, exit providers or who managed the company PS IT Infra 6) Para 6.1 of SCN : It is stated that your trade data in the scrip of PS IT Infrastructure Services Ltd. was procured from BSB u/s, 133(6) of the Act, Further, notices were issued to various parties who had purchased your shares through stock exchange. It was noticed that most of these parties were Kolkata based and traded through Kolkata Stock Exchange, Further no reply was received about their financials, nature of business to prove the genuineness and creditworthiness of these companies. So, in your case, these parties who have purchased your shares through Stock Exchange are in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other details of the investment, they have referrd to my statement for those details. 9) For claiming the exemption u/s. 10(38) of Act, three requirement needs to be fulfilled, (1) the shares should be held for more than 1 year, (2) it should be listed and. sold on recognized stock exchange and (3) on the said sale, necessary security transaction tax (STT) should be paid. Since all the conditions are fulfilled by us, LTCG should be allowed as genuine.. 10) In view of above facts and the documentary evidences placed on record as per the List enclosed, the LTCG of ₹ 99,55,347 is genuine which is exempt u/s. 10(38) and not bogus or accommodation entry. The proposed addition is entirely based on circumstantial evidences without taking the cognizance of documentary evidences placed on record. We therefore request good self kindly to cancel the proposed addition of ₹ 99,55,347 as unexplained cash credit u/s. 68 of the Act oblige. 8. After considering the submissions of the assessee, AO gave his findings in his order as below: a. Mode of acquisition of the shares: The assessee has mainly traded in single scrip. Assessee had purchased 12,500 shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to discharge his onus: The assessee has not been able to justify the circumstances of purchase of shares. He failed to justify the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. Assessee has failed to give any reason why shares of a company (Parag Shilpa Investment Ltd) which is being used for providing accommodation entry would be sold to the assessee for genuine investment purpose. g. Ignorance of the assessee about shares and penny stock companies; Assessee has failed to show of having any knowledge about the shares traded and having any knowledge about the fundamentals of the penny stock companies. M/s Parag Shilpa Investment Ltd was not having any profits to justify the investment in these shares. h. Financial analysis of the penny stock companies: The net worth of the penny stock company is negligible. Even though the net worth of the company and the business activity of the company is negligible the share prices have been artificially rigged to unusual high. i. Arranged transactions; The transactions entered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change as Accommodation Entries. 2) On the facts and the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeal), Mumbai erred in placing reliance on irrelevant considerations which have no bearing on the sale of Shares made by the Appellant on the Recognized Stock Exchange and therefore the addition sustained is bad in law. 3) On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeal), Mumbai erred in confirming the Additions made based on certain Reports from DDIT(lnvestigation) Wing, Kolkata without appreciating that the copies of said Report, Statements if any recorded and opportunity to cross-examine the persons was not provided to the Appellant which is against the principle of natural justice and therefore the same is bad in law. The Appellant craves the leave to add, amend, alter and/or delete any of the above mentioned grounds at/or before the time of hearing of appeal. 12. Before us Ld. AR appearing on behalf of the assessee briefly explained the facts that assessee purchased the shares @ 40 per share by making payment through bank and followed all the procedures and rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m transaction, it is a genuine transaction and whatever the long term capital gain earned by the assessee is only out of their transaction during this period. Therefore, she prayed that proper justice may be given to the assessee. 15. Considered the rival submissions and material placed on record. We notice from the record that identical grounds raised in the present appeal has already been decided by the Coordinate Bench of ITAT in ITA Nos. 4843 1228/Mum/2018 for Assessment Year 2013-14 2014-15 in the case of Ramprasad Agrawal Vrs. ITO (reported in [2018] 100 taxman.com 172 Mum Trib) and Kamla Devi S. Doshi vrs. ITO reported in 88 taxmann.com 773 (Mum-Trib) on merits. For the sake of clarity, order of Coordinate Bench of ITAT in ITA No. 4843 1228/Mum/2018 is reproduced below:- 9. We have heard the rival submissions of both the parties and perused the material on record including the decision of the co-ordinate bench of the Tribunal in ITA Nos.443 444/JP/2017 A.Y. 2013-14 and 2014-15 in the case of Meghraj Singh Shekhawat vs. DCIT. We find that the facts of the assessee s case are identical to the case as cited above. The relevant paras are reproduced as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since, Shri Anil Agarwal was involved in providing bogus long term capital gain in respect of the shares of the companies including M/s Rutron International Ltd., therefore, the transaction of the assessee showing the long term capital gain from sale of shares of M/s Rutron International Ltd. is bogus and consequently the AO made an addition of ₹ 1,32,56,113/- to the total income of the assessee u/s 68 of the Act. Aggrieved by the action of the AO the assessee filed the appeal before the ld. CIT(A) however, the ld. CIT(A) has confirmed the treatment of long term capital gain as bogus transaction and consequential addition made by the AO. 3. Before us, ld. AR of the assessee has submitted that the Assessing Officer has made this addition solely on the basis of the statement of Shri Anil Agarwal recorded statement u/s 132(4) by the Investigation Wing, Kolkata without any corroborative evidence to show that the assessee has converted its unaccounted income in the long term capital gain. He has further contended that even in the said statement recorded u/s 132(4) Shri Anil Agarwal has not mentioned any fact about providing bogus long term capital gain entry to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of the assessee accepted. In support of his contention he has relied upon the Hon ble jurisdiction High Court dated 11-09-2017 in case of CIT vs. Smt. Pooja Agrawal 385/2011 wherein the Hon'ble High Court has held that when the assessee furnished all supporting documents including the cheque, copy of contract note and D-mat account etc. then, the transaction entered into cannot be denied simply on the ground that in his statement the assessee denied made any transaction. Whereas in this case, the assessee never denied having these transactions but the AO has solely relied upon the statement of Shri Anil Agrawal which was recorded by the Investigation Wing, Kolkata without giving an opportunity of cross examine to the assessee. The ld. AR has relied upon the decision of Hon'ble Pubjab and Haryana High Court dated 18.01.2018 in case of CIT vs. Prem Pal Gandhi in ITA No. 95/2017. He has also relied upon the decision of the Coordinate Bench of this Tribunal dated 31.01.2018 in case of Pramod Jain others vs. DCIT in ITA No. 368/JP/2017 and submitted that in all these decisions when the assessee produced the supporting evidence to prove the genuineness of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subsequently the shares were allotted by the company on 01.03.2012. Thus, it is clear that the shares acquired by the assessee is not a trading transaction but these were allotted directly by the company under the preferential issue and hence, the role of intermediate is ruled out. Once, the shares were directly allotted by the company M/s Rutron International Ltd. against the consideration paid by the assessee through cheque. Then the role of any intermediately particular of Shri Anil Agarwal is said allotment does not appear from any of the record. Even as per the statement as reproduced by the Assessing Officer in the assessment order Shri Anil Agrawal has stated that he is having business nexus with the companies including M/s Rutron International Ltd. The department put a question about the association with as many as 13 companies and in response to that he has accepted that he is having business nexus with these companies including M/s Rutron International Ltd. The nature of service was also explained by Shri Anil Agrawal as the consultancy services. For ready reference we quote question No. 4 and 5 and answer, thereto in the statement of Shri Anil Agarwal as reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has stated having business nexus with these companies and nature of business being consultancy services. Hence, he has not stated anything about providing bogus long term capital gain in respect of the equity shares of M/s Rutron International Ltd. A business nexus with any company will not automatically lead to the conclusion that the shares allotted by the other company is bogus transaction. As per question no. 5 and answer thereto it is clear that Shri Anil Agrawal was not the Director of M/s Rutron International Ltd. but he has stated to know some of the directors of these companies including M/s Rutron International Ltd. Hence, from this relevant part of the statement of Shri Anil Agrawal it cannot be inferred that he has provided the bogus long term capital gain from purchase and shares of equity shares of M/s Rutron International Ltd. much less the specific transaction of preferential issue allotment of shares by the company itself to the assessee. Further, though he has explained the modus oprendi of providing bogus long term capital gain entries in the equity shares however, when the transaction was not routed through Shri Anil Agrawal and the shares were allotted direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f affidavit of Shri Anil Agrawal who has retracted his statement before the Investigation Wing, Kolkata however, without going into controversy of the retraction of the statement we find that the statement cannot be used by the AO without giving an opportunity to cross examination of Shri Anil Agrawal. The Coordinate Bench of this Tribunal in case of Pramod Jain and Others vs. DCIT (supra) whole dealing with an identical issue as held in para 6 to 8 as uder:- 6. We have considered the rival submissions as well as relevant material on record. The assessee purchases 800 equity shares M/s Gravity Barter Ltd. for a consideration of ₹ 4 lacs the assessee has produced the purchase bill of the shares purchase from M/s Winall Vinimay Pvt. Ltd. which shows that the assessee purchase 800 equity shares having face value of ₹ 10/- each M/s Gravity Barter Pvt. Ltd. in allots of 400 each for a consideration of ₹ 2 lacs each total amount to ₹ 4 lacs @ ₹ 500 per shares. The purchase price of ₹ 500 per share itself shows that it was not a transaction of purchase of penny stock. These shares were duly reflected in the balance sheet as 31.03.2011. The payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allotment of shares M/s Oasis Cine Communication Ltd. are directly interconnected. In the absence of holding of shares M/s Gravity Barter Ltd. the shares of the M/s Oasis Cine Communication Ltd. could not be issued or allotted to the assessee. Therefore, holding of the shares by the assessee at least at time of amalgamation took place and shares of the M/s Oasis Cine Communication Ltd. on 04.02.2012 cannot be doubted. Moreover, these shares were dematerialized by the assessee in the Demat account, therefore, on the date of allotment of share of M/s Oasis Cine Communication Ltd the assessee was holding these shares and prior to that the assessee was holding the shares of M/s Gravity Barter Ltd. on exchange of the same the shares of M/s Oasis Cine Communication Ltd. were issued to the assessee. The Assessing Officer has doubted the genuineness of the transactions however, once the holding of shares of the assessee at the time of the same were issued by M/s Oasis Cine Communication Ltd. is not in dispute then the holding of shares of M/s Gravity Barter Ltd. also cannot be dispute because of the fact that without holding of the same the shares of M/s Oasis Cine Communication Ltd. co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely because of a short period of time will not be a sufficient reason to hold that the transaction is bogus. The shares allotted to the assessee vide share certificate dated 31.03.2011 were dematerialized on 21.10.2011, therefore, on the date of dematerialization of the shares the holding of the shares of the assessee cannot be doubted and hence the acquisition of the shares of the assessee cannot be treated as a bogus transaction. Nobody can have the shares in his own name in demant account without acquiring or allotment through due process hence, except the purchase consideration paid by the assessee holding of shares cannot be doubted when the assessee has produced all the relevant record of issuing of allotment of shares, payment of share application money through bank, share certificate and demat account showing the shares credited in the demat account of the assessee on dematerialization. The said company M/s Paridhi Properties Ltd. was subsequently merged with M/s Luminaire Technologies Ltd. vide scheme approved by the Hon'ble Bombay High Court order dated 27.07.2012. Hence, the assessee got allotted the equity shares of M/s Luminaire Technologies Ltd. as per swap rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since your good self has got the authority, we humbly request youto kindly issue the notice u/s 131 of the income Tax act 1961 to him also for cross examination. We also request your good self to kingly provide us the copy of statements of Shri Deepak Patwari along with the other relevant documents. Please note that the assessee is ready to bear the cost of his travelling in this regard. It is manifest from the assessee's reply to show cause notice that the assessee had specifically demanded the cross examination of Shri Deepak Patwari however, the Assessing Officer did not offer the opportunity to the assessee to cross examine Shri Deepak Patwari. Further, the AO asked the assessee to produce the Principal Officers of the M/s Gravity Barter Ltd. and M/s Paridhi Properties Ltd. However, in our view if the Assessing Officer wanted to examine the principal Officers of those companies he was having the authority to summon them and record their statements instead of shifting burden on the assessee. It is not expected from the assessee individual to produce the principal Officers of the companies rather the AO ought to have summoned them if the examination of the officers wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise 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. 8. 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 statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice. Therefore, the statement of witness cannot be sole basis of the assessment without given an opportunity of cross examination and consequently it is a serious flaw which renders the order a nullity. The Mumbai Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. Therefore, when the Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by in cash. But the transaction is established from the evidence and record which cannot be manipulated as all the entries are part of the bank account of the assessee and the assessee dematerialized the shares in the D-mat account which is also an independent material and evidence cannot be manipulated. Therefore, the holding of the shares by the assessee cannot be doubted and the finding of the AO is based merely on the suspicion and surmises without any cogent material to show that the assessee has introduction his unaccounted income in the shape of long term capital gain. We find that the ld. CIT(A) has also referred to SEBI enquiry against the M/s Anand Rathi Share and Stock Brokers Ltd. However, we note that the said enquiry was regarding financial irregularities and use of fund belonging to the clients for the purpose other than, the purchase of shares on behalf of the clients. Therefore, the subject matter of the enquiry has no connection with the transaction of bogus long term capital gain. The decisions replied upon the ld. DR in case of Sanjay Bimalchand Jain vs. Pr. CIT (supra) is not applicable in the facts of the present case as the said decision is in respect penny ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
