2021 (4) TMI 258
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....t, 1961. 4. Briefly the facts of the case are that return of income for the assessment year under appeal was filed on 31.08.2015 declaring income of Rs. 13,17,580/- which was processed under section 143(1) of the Act. In the return of income, the assessee had claimed Long Term Capital Gain of Rs. 1,60,98,447/- exempt under section 10(38) of the Act on account of trading in shares of M/s. Eins Eductech Ltd., (Previously known as Thyrocare Lab) on BSE. The transactions were STT paid, therefore the gain was claimed exempt under section 10(38) of the I.T. Act, 1961. The assessee had invested Rs. 22,50,000/- by two cheques in purchase of 1,50,000 equity shares of M/s Eins Eductech Ltd in the month of July, 2013 through preferential allotment @ Rs. 15/- per share. These shares were credited in the Demat Account of the assessee on 25.11.2013. These shares remained, in lock-in by order of the SEBI till 15.10.2014. Out of these shares 34,451 shares were sold-out by the assessee from 16.10.2014 to 10.03.2015 for a total consideration of Rs. 1,27,42,768/- (including STT of Rs. 12,767/-) through her brokers M/s. SMP Securities Ltd and M/s SS Corporate Securities Ltd. Thereafter, on 13.03.2015....
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.... Rs. 13,70,503/- which was duly declared in the return of income. The assessee also incurred a loss of Rs. 26.72.949/- on sale of shares of another unlisted company namely USG Solutions Private Limited and accordingly claimed a carry forward loss of Rs. 13,98,496/-. This carry forward has been duly allowed by the Assessing Officer while framing the assessment in the assessment year under appeal. Apart from this, the assessee has also sold part of shares of EINS Edutech Limited which were purchased by her in the immediately preceding year and earned a long term capital gain of the impugned amount. These shares were sold on the stock exchange through online trading platform of the stock exchange and STT has also been paid. Therefore, it was rightly claimed as exempt from Tax. The A.O. did not point-out any discrepancy in the documentary evidences filed by the assessee and merely relied upon some investigation which was conducted at the back of the assessee which cannot be read in evidence against the assessee. The findings of the A.O. are mainly based on suspicion without bringing any evidence on record against the assessee. The A.O. has failed to appreciate that assessee has not tra....
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....d at the back of the assessee or any statement recorded at Kolkata and others. Therefore, such evidence cannot be read in evidence against the assessee. The assessee also relied upon several decisions of different Benches of the Tribunal and Judgments of the Hon'ble High Courts in which the additions have been deleted. The name of the cases are mentioned at Page-7 of the appellate order. The assessee, therefore, prayed that entire addition may be deleted. 4.2. The Ld. CIT(A) considering the submissions of the assessee and material on record, deleted the addition and allowed the appeal of assessee. The findings of the Ld. CIT(A) in Paras 6 to 6.1.5 of the appellate order are reproduced as under : "6. Decision : 6.1.1 . Through Ground Nos. 1 to 4, the appellant has impugned the addition of Rs. 1,60,98,447/- to the income of the assessee by the AO by rejecting the claim of exemption u/s 10(38) of the Act earned through sale of listed equity shares of M/s Eins Edutech Ltd (previously known as Thyrocare Laboratories Ltd) on BSE. Since grounds are in respect of common issue hence these grounds are being clubbed together. 6.1.2 . In her return of income the assessee has claimed L....
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....from the internet. It is noticed that during the period under consideration the company has authorized capital of 15 Crore and issued share capital of 14.38 Crores. He alleged that the net worth of the company is negligible and even then the share prices have been artificially rigged by the group of operators to accommodate beneficiaries seeking LTCG or STCL. He apprehended that no prudent business man and particularly trader or investor in stock will invest in such penny scrip which is defunct and in-operative. The AO has discussed the business activity of the company that the income earning is very low. The company is in education business to readymade garments and trading of sarees. The AO has also reproduced the relevant questions of the statements of Sh. Bhagwan Das Aggarwal, (one of the director of the company) dated 10/01/2014 and Sh. Pawan Kumar Kayan (a subbroker and one of the exit provider) dated 30/03/2015 recorded u/s 131 by the Kolkata Directorate in which they accepted that they are arranging accommodation entries on commission basis. 6.1.3 During the assessment proceedings, the AO had issued show cause notice u/s 142(1) and also called the assessee u/s 131 a....
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.... of which was Rs. 6,45,765/- and indexed cost Rs. 7,04,221/-. The remaining 1,06,949 (10,69,490 after splitting @ Re 1/-) shares having cost of Rs. 16,04,235/- are still unsold. The appellant sold out these 43,051 shares on BSE through her brokers M/s SMP Securities Ltd as well as M/s SS Corporate Securities Ltd for a sale value of Rs. 1,68,02,668/- and claimed the capital gain of Rs. 1,60,98,447/- exempt u/s 10(38). It is noticed that the appellant is regular investor in shares and she is not new in this business. This is evident from her demat account as well as her ITR. The AO has doubted the capital gain only in the case of Eins Edutech Ltd. He strongly relied on the report of the Kolkata Directorate and on the basis of which he held the LTCG as bogus and disallowed the entire claim made u/s 10(38) and added Rs. 1,60,98,447/- to the income of the appellant. The AO has not made any independent enquiry to prove that the transaction was sham in nature. He failed to bring any material on record to prove that the appellant was also involved in bogus share transactions and she was directly involved in any manner to get benefitted with the bogus entries of LTCG. Mere reliance on the....
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....egularly trading in shares and purchase in earlier year have not been doubted. Therefore, initial onus upon the assessee to prove source of the sale proceeds have been explained through documentary evidences. Therefore, the Learned. Commissioner of income Tax (Appeals) has correctly deleted the addition. He has relied upon decision of the Delhi and Jaipur Tribunal in various cases, copies of which are filed in the paper book. 7. We have considered the rival submissions of both the parties and perused the material available on record. It is not in dispute that assessee has purchased preferential shares in preceding A.Y. 2014-2015 in July, 2013. The A.O. did not doubt the purchase of shares by assessee through banking channel. The assessee, thereafter, credited these shares to the Demat Account in November, 2013 i.e., in preceding assessment year. According to the impugned orders the shares were locked in by the Order of the SEBI till 15.10.2014 and thereafter the assessee sold the shares through the registered broker of the BSE at the BSE. The assessee paid STT on these transactions. The shares sold through recognized stock exchange through the SEBI registered stock brokers whic....
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....e price of a particular company on the stock exchange is not merely dependent on its financials. There are many reasons and that it is not possible to sale/purchase the shares of any company on the stock exchange in variance to the prevailing market price at any point of time. Therefore, the mere fact that shares were sold on high price would not be a ground to allege that assessee has converted someone's unaccounted money through accommodation entry. The findings of the A.O. are merely based on conjectures and surmises without bringing any evidence on record. There is no other basis to doubt the transaction of the assessee for earning of long term capital gains which is exempt under Law. The ITAT, Delhi G-Bench, Delhi in the case of Shri Tapas Kumar Mallick, West Delhi vs., ACIT, Circle-32(1), New Delhi in ITA.No.8142/Del./2018 for the A.Y. 2015-2016 vide Order Dated 19.03.2021 considering identical issue in the light of recent Judgment of the Hon'ble Delhi High Court in the case of PCIT vs., Krishna Devi & Others Dated 15.01.2021 in paras 17 to 24 held as under : "17. A perusal of the assessment order clearly shows that the Assessing Officer was carried away by the report of th....
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....usion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not tak....
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.... nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last factfinding authority, on the basis of the evid....
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....essing the securities market by issuing prospectus, offer document or advertisement soliciting money from the public in any manner for a period of 8 years. iv. Noticee no. 2 and 3 are hereby restrained from holding post of director, any managerial position or associating themselves in any capacity with any listed public company and with any public company which intends to raise money from the public, or with any intermediary registered with SEBI for a period of 3 years. v. The Noticees, as mentioned below are hereby restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in any manner whatsoever manner, for the period specified in their respective columns: Sr. No Name of the Noticee PAN Debarred vide interim Order Period of debarment 1 HPC Biosciences Ltd AABCH6762Q Yes Till date of this order. 2 Shri. Tarun Chauhan AGXPC3049G Yes Till date of this order 3 Ms. Madhu Anand AXTPA8813F Yes Till date of this order 4 Goldline International Finvest Ltd. AACCG6377M Yes Till date of this order 5 Shri. Madhukar Dubey & its Proprietorship firm viz. N V Sales Corporation, Magnum Industrial Alliance Tra....
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....19, for the A.Y. 2016-2017, challenging the deletion of addition of Rs. 12,92,40,482/- under section 10(38) of the I.T. Act, 1961. 10. Briefly the facts of the case are that the assessee is an individual and filed return of income declaring income of Rs. 17,96,210/-. The assessee has shown income from business, capital gain and income from other sources. In assessment year under appeal the assessee has claimed long term capital gains as exempt under section 10(38) of the I.T. Act, 1961. The details of the same are as under : "Capital gains Long term capital gains Shilpi Cable Technologies Ltd., (Exempt u/s.10(38) Full Consideration Rs. 15,26,38,102/- Less: Cost of Acquisition Rs. 2,33,97,620/- LTCG (Exempt u/s.10(38)) claimed Rs. 12,92,40,482/- 10.1. The A.O. considered the capital gains claimed by the assessee to be bogus. The A.O. discussed the modus operandi of the persons arranging the bogus long term capital gains through entry provider and through exit providers. The A.O. found that assessee has purchased the shares of Shilpi Cable Technologies Ltd., in physical form and thereafter same have been converted into electronic mode. In such case off-market transactio....
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....as could be evident from the details of this company downloaded from internet. The audited financial data and other details would show that even Mutual Funds and Foreign Institutional Investors held shares of this Company. This company has also declared dividend to Investors. Shilpi Cable Technologies Ltd., is a company which was engaged in actual business of manufacturing of sale of specialized cable and its customers included reputed brand names like Vodaphone, Nokia, Tata, Videocon, ITI, Ashok Leyland, Eicher, TVS etc. The assessee purchased the shares of this company through account payee cheques in F.Y. 2012-2013 when the sales turnover of the company was to the tune of Rs. 957.07 crores and the same increased to Rs. 1752.94 in F.Y. 2013-2014. There was a quantum jump in sales turnover in F.Y. 2014-2015 when the turnover was reported at Rs. 3212.93 crores and in F.Y. 2015-2016 it increased to Rs. 3895.53 crores and then in F.Y. 2016-2017 it was reported at Rs. 3840.48 crores. This company is doing actual business and has substantial revenue from the sale of products manufactured by it. Shilpi Cable Technologies Ltd., was consistently a profit making company as would be eviden....
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....3895 crores during the instant year when the assessee has sold the impugned shares. Similarly the company is found to be earning a profit before tax of Rs. 70.09 crores in assessment year 2013-14 when the assessee purchased the shares and its profit has risen to Rs. 197.22 crores in the instant year when the impugned shares were sold. It is also seen that Shilpi Cable Technologies Limited has been consistently paying income tax on its income right from assessment year 2010-11 to assessment year 2017-18. It is also seen that it has substantial fixed assets, long term borrowings from banks etc. It also has paid dividend to its shareholders in three years namely assessment year 2015-16 to assessment year 2017-18. I have also gone through the company profile available on Internet, copies whereof have been filed before me, according to which the company had two manufacturing units wherein various types of cables and wires were manufactured and the company claims to have customers like BSNL, MTNL, Vodafone, Nokia, Tata Motors, TVS etc. The shareholding pattern of that company also shows that even mutual funds and foreign institutional investors hold about 22 to 23% Equity of this com....
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....he appellant during the instant year are on online trading platform of stock Exchange when the same were sold on NSE through SEBI registered broker and STT was paid by the appellant as per time stamped contract notes available on record. The payments have been realized from stock exchange through the member brokers and the shares sold have been delivered out from the demat statement of the appellant. The shares sold by the appellant during the instant year were held by him for more than three years, thus he fulfilled all the conditions for allowance of exemption u/s 10(38) of the Act. vii. It is seen that none of these facts has been controverter by the AO. The AO has chosen to restrict himself to general modus operandi in the case of penny stocks without bringing on record any specific incriminating material that could link the shares of Shilpi Cable Technologies Etd. to any of such investigative reports. Thus there is no evidence on record to prove that the transactions carried out by the assessee were not genuine or that such documents furnished in support thereof were not authentic. Besides, it would not be out of place to mention here that no specific enquiry or investigatio....
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....hased by the Gupta family. The Ld. D.R. relied upon the following decisions : 1 Order of ITAT, Nagpur Bench, Nagpur in the case of Shri Sanjay Bimalchand Jain, Nagpur vs., ITO, Ward-4(2), Nagpur in ITA.No.61/Nag/2013 Dated 18.07.2016 2 Order of ITAT, Chandigarh Bench in the case of Shri Abhimanyu Soin, Ludhiana vs., ACIT, Circle- VII, Ludhiana in ITA.No.951/Chd/2016 Dated 18.04.2018 reported in 2018-TIOL-733-ITAT-CHD. 3 Order of ITAT, Delhi SMC-Bench, Delhi in the case of Udit Kalra, New Delhi vs., ITO, Ward-50(1), New Delhi in ITA.No.6717/Del.//2017, Dated 08.01.2019. 4 Order of ITAT, Delhi B-Bench, New Delhi in the case of Shri Sanat Kumar, Delhi s., ACIT, Circle- 36(1), New Delhi in ITA.No.1881/Del./2018 & Stay No.233/Del./2019 Dated 14.06.2019 reported in 2019-TIOL-1296-ITAT-Del. 12. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and relied upon the arguments made in the case of Smt. Shivani Gupta (supra). 13. We have considered the rival submissions and perused the findings of the authorities below. The A.O. in this case noted that assessee has sold the shares of Shilpi Cable Technologies Ltd., and cla....