TMI Blog2021 (5) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... .02.2018 is with regards to ban on trading of Bharat Bachubhai Merchant, Director of Nimbus Industries Ltd., by SEBI vide its order dated 30.09.2012 for market manipulation during the Initial Public Offering (IPO) of P. G. Electroplast Ltd., and M. R. Shah, Director of Regency Trust Ltd is concerned, the assessee has purchased shares much prior to the orders of SEBI. Moreover, there is no live link in the order of SEBI about the transactions of shares of assessee under scrutiny, so such order cannot be read against the assessee in absence of ant corroborative evidence. In fact there is no evidence on record that the assessee made any prearranged transactions. Thus, we do not find merit in the order of ld. CIT(A) in sustaining the additions on mere probability. The Hon ble Supreme Court in Umacharan Shah brothers Vs CIT [ 1959 (5) TMI 11 - SUPREME COURT] held that suspicion howsoever strong, may be cannot substitute the place of evidence. Also held in OMAR SALAY MOHAMED SAIT VERSUS COMMISSIONER OF INCOME-TAX, MADRAS [ 1959 (3) TMI 2 - SUPREME COURT] that no additions can be made on the basis of surmises, suspicion and conjecture. - Decided in favour of assessee. Exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the assessing officer in disallowing the exemption of ₹ 1,66,406/- claimed by assessee u/s. 10(2A) on account of share of profit of firm and treating it as the income of assessee. 3. It is therefore prayed that the above addition made by the assessing officer may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal. 2. Brief facts of the case are that the assessee is an individual, during the relevant financial year 2001-12, the assessee was allegedly engaged in the business of brokerage of land. The assessee filed its return of income for relevant assessment year 2012-13on 31.03.2013 declaring income of ₹ 65,60,220/-. In the computation of income, the assessee has shown income from house property and other sources . The return of income was selected for scrutiny. During the assessment, on verification of return of income, the assessing officer (AO) noted that assessee has claimed exempt income of ₹ 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee also furnished the copy of transaction statement i.e. ledger and contract notice of LTCG and copy of income tax return of Firm (AOP) along with computation of income and partners account. The Assessing Officer after going through the evidences furnished by the assessee held that on verification of account of broker namely Nirmal Bang Securities Pvt. Ltd., and Krishi Securities, it is seen that no transaction is reflected for sale of securities amounting to ₹ 30,32,140/- as on 20.01.2012 and ₹ 9,72,81,212/- in respect of Nimbus Industries and Regency Trust. The contract notice of Nirmal Bang Securities Pvt. Ltd., also does not reflect the sale of listed securities of the aforesaid amount. The Assessing Officer took his view that in absence of any documentary evidence showing exempt LTCG, the assessee failed to prove that capital gain is exempted as per section 10(38) of the Act. Therefore, the Assessing Officer made addition of ₹ 8.67 crore, which includes the income from Firm/AOP (Desai Gas Agency). Aggrieved by the additions/ disallowances in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid view, the Assessing Officer concluded that both companies [share of which were traded by assessee] were not having potential, so that assessee could earn enormous capital gain. 8. On receipt of remand report, the assessee filed his objection/ rejoinder dated 28.03.2018. In the objection/submission 28.03.2018, the assessee inter-alia stated that the assessee has furnished complete details of the share transaction of both the scrips, including the periods of holding, share transaction tax (STT) was paid on the transactions, transactions were made through stock exchange, payments were made through banking channels, which has been confirmed by the assessing officer. The assessing officer has accepted the transaction of both the scrips. No adverse findings on the evidences furnished by the assessee were given by the assessing officer. It was also stated that the assessing officer has given different report to mislead. The assessee is investor and in case the broker was indulging in malpractice of some other transaction, the investor s investment cannot be treated as non-genuine. The assessee also relied on certain case laws. 9. The ld.CIT(A) after considering the reman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri M.R. Shah was banned for trading on the ground of allegation of the price rigging in case of Kelvin Fincap Ltd. 12. The ld. AR for the assessee thus, submits that the objection of the assessing officer, on the basis of interim order of the SEBI were not proper as both the companies in which assessee transacted were not alleged to be involved in price rigging or manipulation. Hence, it is clear that both the lower authorities failed to prove that either of the companies or the directors or the brokers is involved in price rigging or manipulation in case of both the scrip s. No iota of the evidence was brought on record by lower authorities to prove that the fundamentals of any of the companies in which assessee transacted were weak. It is submitted that both the companies are listed companies even at present and they are marked as active as per the latest Ministry of Corporate Affairs (MCA) master data. 13. The ld. AR for the assessee further submits that it is to be noted that the additions in this case is not based on investigation report of either income tax department or other authority or on the statement of entry provider. Further as submitted above SEBI has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unerringly and reasonably raising interference to that effect. The Hon ble Supreme Court in Umacharan Shah Bros. Vs CIT (37 ITR 271 SC) held that suspicion however strong, cannot take the place of evidence. 15. The ld AR for the assessee again retreated that assessee earned capital gain of ₹ 8,36,31,212/- from the sale of scrips Regency Trust Ltd. out of the total capital gain of ₹ 8,66,13,252/-.The Chennai Tribunal in case of Vandana S. Bhandari Vs ITO [ITA No. 2854/Chny/2019], allowed the long term capital gain made on the sales of scrips of Regency Trust Ltd. 16. The ld AR for the assessee further made reliance on the other decisions of the various High Courts where the addition on account of capital gain derived in case of penny stock scrips was not sustained: M/s Classic Growers Ltd. vs. CIT [ITA No. 129 of 2012] (Cal HC) CIT Vs. Lakshmangarh Estate Trading Co. Limited [40 taxmann.com 439 (Cal HC)] CIT Vs. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) CIT Vs. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) CIT Vs. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) CIT Vs. Bhagwati Prasad Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.03.2016 57-70 13. Letter filed before Assessing Officer 23.11.2015 71-72 14. Order Sheet from the file of assessment proceedings received under RTI 28.10.2015 73-74 15. Corrigendum Order 09.10.2015 75 16. Second Assessment Order 31.03.2015 76-80 17. First Assessment Order 31.03.2015 81-90 18. Letter filed before Assessing Officer 17.03.2015 91-107 19. Show Cause notice issued by Assessing Officer 09.03.2015 108-115 20. Notice issued u/s 142(1) 25.02.2015 116 21. Letter filed before Assessing Officer 07.01.2015 117-121 22. Show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd for the period of 01.04.2011 to 31.03.2012 --- 213-216 36. Balance Sheet of the assessee as on 31.03.2011 --- 217-219 37. Ledger of Regency Trust Ltd for the period of 01.04.2010 to 31.03.2011 --- 220 38. Ledger account of Nimbus Industries Ltd for the period of 01.04.2010 to 31.03.2011 --- 221 39. Share Certificate regarding purchase of shares Regency Trust Ltd. 19.01.2010 222-234 40. Share application form regarding purchase of shares Regency Trust Ltd. 01.01.2010 235-238 41. Memorandum of transfer of shares of Nimbus Industries Ltd. 30.06.2010 239-245 42. Letter issued by Nimbus Industries Ltd. for transfer of shares 30.06.2010 246 43. Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O [ITA No. 2854/Chny/2019], allowed the long term capital gain made on the sales of scrips of Regency Trust Ltd. The ld. AR for the assessee again retreated that assessee earned capital gain of ₹ 8,36,31,212/- from the sale of scrips Regency Trust Ltd. out of the total capital gain of ₹ 8,66,13,252/-. On the decision of Delhi High Court in Suman Poddar Vs ITO (supra), the ld. AR for the assessee submits that in said case the assessing officer had brought on record that the fundamentals of the Cressanda Solutions Ltd. was not proper so as to increase in share price by fifty times over a short period of five months. In said case employee pensions scheme (EPS) was just 0.01 in March 2016 which was in negative in March 2015 March 2014. Further, it was found in that case that no evidence of actual sale except for contract notes issued by broker were produced by the assessee. Further, in that case the addition was also based on the statement of entry provider and investigation report. The ld. AR made reliance on the latest decision of Delhi High Court in case of PCIT Vs Krishnadevi in ITA No. 125/2020 dated 15.01.2021 where it was held that Lastly, reliance placed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed broker. 21. On repeated directions of the Ld. CIT(A), the Assessing Officer furnished his remand report dated 15.03.2018, wherein the assessing officer accepted that contract note and edger accounts furnished by assessee are matching with the data furnished by the Stock Exchange. 22. We have further seen that the assessing officer further vide his another report furnished vide letter dated 28.02.2018 to ld.CIT(A), stated that Bharat Bachubhai Merchant, Director of Nimbus Industries Ltd., was banned from trading by Security and Exchange Board of India (SEBI) vide its order dated 30.09.2012 for market manipulation during the Initial Public Offering (IPO) of P. G. Electroplast Ltd. The Assessing Officer also stated that M. R. Shah, Director of Regency Trust Ltd was also banned from trading by SEBI vide order dated 14.08.2014 for market manipulation through artificial increasing the sale price and concluded that both companies [share of which were traded by assessee] were not having potential, so that assessee could earn enormous capital gain. On the basis of the second report of the assessing officer the ld. CIT(A) held that although the basis for making the addition did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual sale except for contract notes issued by broker were produced by the assessee and the addition was also based on the statement of entry provider and investigation report. However, there is no iota of even a single allegation in the present case as in case of Suman Poddar (supra). 26. Hence, the ground No. 1 of the appeal is allowed. 27. In the result ground No. 1 of the appeal is allowed. 28. Ground No. 2 relates to disallowance of ₹ 1,66,406 claimed as exempted under section 10(38). The ld. AR for the assessee submits that the assessing officer has not allowed the exemption under section 10(2A) in respect of share of profit from the Firm namely Desai Gas Agency , in which the assessee is one of the partner. The assessee received income of ₹ 2,56,485/- as remuneration, ₹ 3,90,852/- as interest and ₹ 1,66,406/- as share of profit from firm. Out of this, the amount of share of profit of ₹ 1,66,406/- is allowable as exemption under section 10(2A). The assessing officer clubbed this exempt income with the LTCG. The ld CIT(A) also not appreciated the facts and confirmed the action of the assessing officer. Before the lower authorities the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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