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TMI Blog2019 (6) TMI 1624X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant year by wrongly treating the same as bogus and suspicious nature of transaction. 3. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing. 3. The brief facts qua the issue are that the assessee has filed its return of income for assessment year 2015-16 on 15.10.2015 declaring total income to the tune of Rs. 7,50,830/-. The assessee's return was processed u/s 143(1) of the Act. Later on, the assessee's case was selected for scrutiny u/s 143(2) of the Act on account of suspicion sale transaction in shares and exempt long term capital gain. The assessing officer, during the scrutiny assessment, noticed that assessee earned long term capital gainfrom sale of shares of M/s Kailash Auto Finance Ltd. This long term capital gain was claimed exempt from income Tax, as per section 10(38) of the Act. In the course of assessment proceedings the assessee was asked to furnish the details of such shares transaction. In response, the assessee submitted that he was not involved in the regular activities of the transaction in shares, expect from the exempt long term capital gain earned from the sale of shares of M/s Kailash Auto Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alleged broker duly confirmed the transactions with collaborative evidence before the ld. Assessing Officer. The ld. Assessing Officer added the LTCG amount of Rs. 42,06,250/- to the total income of the assessee u/s 68 without recognizing the above fact that the transactions were made through bank on the platform of a recognized stock exchange and transactions are duly supported by a valid contract notes. We note that the ld. Assessing Officer had added back Rs. 42,06,250/- to the total income of the assessee, just by forming the generalized view and not considering the submission made by the assessee. 7. We note that before us the assessee submitted income tax return acknowledge copy for assessment year 2015-16 (vide PB-1). The assessee submitted computation of income for assessment year 2013-14 and assessment year 2015-16 (vide PB- 4A to 7A). The assessee submitted the balance sheet and profit and loss account for assessment year 2013-14 and for assessment year 2015-16 (vide PB-3 to 4). The assessee submitted details of share transaction (PB-8).Copy of purchase bills also placed in the paper book (vide PB-9). The assessee submitted the copy of the bank statement showing trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act is evident from the details given below: IMAGES 1 Thus, from the above table, it is abundantly clear that the assessee is a regular investor in shares and is having a substantial amount of investments. During the year under consideration, the assessee has sold the impugned three scrips and earned capital gains on the same which is claimed year after year consistently. The details of long term capital gain earned by the assessee is given below: IMAGES 2 We note that the assessee claimed exemption of LTCG of Rs. 7,12,89,467/- u/s 10(38) of the Act, since the shares purchased and sold were listed shares and were purchased and sold through stock broker in Stock Exchange and STT was deducted at the time of sale. The details of purchase and sales transaction made by the assessee is given below: IMAGES 3 Therefore, the details of LTCG of Rs. 7,12,89,467/- earned during the financial year on account of sale of shares through a registered stock broker in a recognized Stock Exchange and claimed as exempt u/s 10(38) of the Act is as under: IMAGES 4 IMAGES 5 We note that the AO in his order has discussed about the interim order of SEBI, where SEBI has restrained some pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,00,000 shares of Careful Projects Advisory Ltd. from Trump Traders Pvt. Ltd. (Paper Book Page No. 5) iii) Copy of Bank Statement reflecting the debit transaction of the amount of Rs. 3,20,000/- paid for the purchase of shares by cheque no. 729958 on 10.02.2012 (Paper Book Page No. 9) iv) Copy of Bank Statement reflecting the debit transaction of the amount of Rs. 9,00,000/- paid for the purchase of shares by cheque no. 037633 on 09.10.2012 (Paper Book Page No. 8) v) Copy of statement of DEMAT account evidencing the debit of shares of Kailash Auto Finance Ltd. on 07.04.2014, 09.04.2014, 10,04,2014, 11.04.2014, 15.04.2014, 16.04.2014 and so on; (Paper Book page no. 64- 65) vi) Copy of order approving the Scheme of Amalgamation passed by the Hon'ble High Court in relation to merger of Kailash Auto Finance Ltd. and Careful Projects Advisory Ltd. and Panchshul Marketing Ltd. (Paper Book page No. 85-115). vii) Copy of Contract Notes evidencing the sale of shares of Kailash Auto Finance Ltd. viii) Copy of bank statement reflecting the transactions of sale of shares of Kailash Auto Finance Ltd. (Paper Book page No. 59-61) ix) SEB1 by its interim order dated 29.03.2016 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Ltd., Lifeline Drug & Pharma Ltd, and EinsEdutceh Ltd. (Now Aplaya Creations Ltd.) are genuine. We also note that the Securities Exchange Board of India (SEBI) also declared these scrips and shares as genuine and the interim order passed by the SEBI was revoked by SEB1 itself, vide its order SEB1/WTM/MPB/EFD-DRA- 1/31/2017 dated 21.09.2017 (page nos. 69-84). Assessee's name is at S.N. 154 (at page no. 80) read with para 7 of Page no. 83. Hence, we note that since these shares/scrips were traded on the platform of recognized stock exchange and the Securities Exchange Board of India (SEBI) did not give any adverse reporttherefore, long term capital gain arise or earned by the assessee should be genuine and it should not be bogus by any stretch of imagination. Moreover, the assessing officer did not doubt on the documents and evidences as noted by us above. The assessing officer mainly made addition based on suspicion, and probability. As we have noted that in the course of assessment proceedings, all the relevant details and documents requisitioned by the ld. Assessing Officer in notice u/s 142(1) was filed before him. The assessee has submitted the details of LTCG, copy of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the aforesaid scrips would not be considered bogus, and consequently, be added to his total income. The assessee duly replied to the show cause notice vide his letter dated 22.12.2017 thereby giving all the details and reasons as required by the AO to prove that the LTCG incurred by the assessee on sale of above mentioned shares are genuine and cannot be considered as bogus. However, the Ld. AO did not consider the submission of the assessee and made the addition of LTCG in the hands of the assessee treating the same to be unexplained. We note that it appears from the show cause notice that the Ld. AO has relied on the following information for arriving at such conclusion: (a) Information received from the office of DIT(Inv), Kol regarding entry of bogus LTCG. (b) Statement given by Sri Sunil Dokania, an alleged entry operator who was involved in price rigging and providing Bogus LTCG through penny stocks. So far first allegation of AO is concerned, we note that the assessee has purchased the shares from the recognized stock exchange through his broker i.e. Eureka Stock & Share Broking Services Ltd. on various dates. The assessee submitted Contract Notes. This transaction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage charges and Stamp duty. The share purchase and sale transactions are reflected in the d-mat account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange. Therefore, we do not agree with the assessing officer and hence the addition made by assessing officer needs to be deleted. So far second allegation of the assessing officer is concerned, we note thatassessing officer has relied on the statement given by Sri Sunil Dokania, an alleged entry operator. We note that the AO has made general allegations about the alleged entry operator, Sri Sunil Dokania, vide page no. 22 of the assessment order. We note that no copy of such statement was given to the assessee nor any opportunity of cross examination of the party was allowed to the assessee. Further, the AO did not brought any corroborative evidence on record to substantiate the contents of the statement relied on. We note that not allowing the assessee to cross examine the witness by the adjudicating authority though the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections given by SEBI. We note that SEB1 by its interim order dated 29.03.2016 restrained 246 entities from accessing the securities market and from dealing and buying & selling in securities, directly or indirectly in any manner whatsoever till any further directions (Page No. 69) and included Kailash Auto Finance Ltd. and assessee at Serial No. 1 and Serial No. 156 (Page Nos. 70 & 74 respectively) . However, the same was revoked by SEB1 vide its order SEB1/WTM/MPB/EFD-DRA1/31/2017 dated 21.09.2017 (page nos. 69-84). Assessee's name is at S.N. 154 (at page no. 80) read with para 7 of Page no. 83. We note that the SEBI by its order bearing reference no. SEBI/WTM/MPB/EFD- DRA-I/31/2017, dated 21.03.2017, has held as under: "6.Considering the fact that there are no adverse findings against the aforementioned 244 entities with respect to their role in the manipulation of the scrip of Kailash Auto, I am of the considered view that the directions issued against them vide interim order dated March 29, 2016 and confirmatory orders dated June 15, 2016, September 30, 2016, October 21, 2016, October 27, 2016 and July 13, 2017 are liable to be revoked. In view of the foregoing, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Sunil Dokania, whose statement has been relied on by the AO for making the addition. However, the Ld. AO did not provide any opportunity for cross examine the so-called operators. It is well established law that no adverse view can be taken against an assessee on the basis of statement recorded by department of any person without providing copy of the statement to the assessee and also without providing opportunity for cross examination of the said person. 18. We note that Hon'ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd. [2017] 83taxmann.com 161 (Bom) held that there was no evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. In the said case, the Hon'ble High Court at Para 21 held that in absence of any material to show that huge cash was transferred from one side to another, addition cannot be sustained. 19. We note that all the observations, conclusions and findings of the lower authorities are based on suspicion, surmises and rumor. It is trite law that the suspicion howsoeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na Devi Gupta & Others vs. ACIT - ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 21. The ld Counsel also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon'ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon'ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon'ble Apex Court further held that it is not enough to show circumstances which might create suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. The ld A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transactions were as per norms prescribed by SEBI and concerned stock exchange and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. AO did not doubt the genuineness of the documents submitted by assessee. The ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. The assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. In these circumstances, the long term capital gain (LTCG) earned by the assessee should not be treated as bogus, as held by the jurisdictional Hon`ble Calcutta High court in various cases, as mentioned below: (i). CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal- HC) In this case the Hon'ble Calcutta High Court held that the Assessing Officerdoubted the transactions since the selling broker was subjected to SEBI'saction. However, the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over thetransactions as it were reflected in demat account. The appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount payee instruments, which were also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed." (vi) The Hon'ble Calcutta High Court in the case of Principal Commissioner Of Income vs M/S. Blb Cables And Conductors; ITAT No.78 of 2017, GA No.747 of 2017; dt. 19 June, 2018, had upheld the order of the Tribunal by observing as follows:- "4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colourable transactions or were resorted to with ulterior motive. We note that above mentioned judgments of Hon`ble Calcutta High Court, by and large held that where the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee cheques, then in these facts and circumstances addition made by assessing officer on account of bogus long term capital gain should be deleted. We note that unless and until the order of Jurisdictional Hon`ble High Court is reversed by Hon`ble Supreme Court, the same has to be given due effect. Judicial discipline demands that once an order has been passed in the assessee's own case, by the Jurisdictional High court, the Tribunal is duty bound to act in accordance with the same. We note that in the case of Union of India v. Raghubir Singh (1989) 178 ITR 548 (SC), the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rya Prakash Toshniwal vs. ITO - ITA No. 1213/Kol/2016 (Kol ITAT) (xxvi) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT) (xxvii)Ms. Farrah Marker vs. ITO - ITA No. 3801/Mum/2011 (Mumbai ITAT) (xxviii) Anil Nandkishore Goyal vs. ACIT - ITA Nos. 1256/PN/2012 (Pune ITAT) (xxix) CIT vs. Sudeep Goenka - [2013] 29 taxmann.com 402 (Allahabad HC) (xxx) CIT vs. Udit Narain Agarwal - [2013] 29 taxmann.com 76 (Allahabad HC) (xxxi) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xxxii)CIT vs. Himani M. Vakil - [2014] 41 taxmann.com 425 (Gujarat HC) (xxxiii) CIT vs. Maheshchandra G. Vakil - [2013] 40 taxmann.com 326 (Gujarat HC) (xxxiv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xxxv) GaneshmullBijay Singh Baid HUF vs. DCIT - ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xxxvi) Meena Devi Gupta & Others vs. ACIT - ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xxxvii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xxxviii) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 29. The ld AR also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2017. We note that in the case relied upon by the ld. D.R, we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 32. It is clear from the above that the facts of the case of the assessee are identical with the facts in the cases wherein the co-ordinate bench of the Tribunal has deleted the addition and allowed the claim of LTCG on sale of shares of M/s KAFL. We, therefore, respectfully following the same, and set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed." 36. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition." (iii).Navneet Agarwal, ITA No.2281/Kol/ 2017, order dated 05.09.2018 "The assessee in this case had stated that the assessee was allotted of 50000 equity shares of SCITIL. The payment for the allotment of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee's action giving her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income exempt from income tax, by way of cheque through Banking channels. This allegation that cash had changed hands, has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation's office by way of statements recorded etc. has to also be brought on record in each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assessee, if the Assessing Officer relies on any statements or third party as evidence to make an addition. If any material or evidence was sought to be relied upon by the Assessing Officer, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was in collusion with them. In absence of such finding how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter should be sent to the assessment wing to assess the income as per law. No such action executed by investigation wing against the assessee. In absence of any finding specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, the Assessing Officer at best could have considered the investigation report as a starting point of investigation. The report only informed the Assessing Officer that some persons may have misused the script for the purpose of collusive transaction. The Assessing Officer was duty bound to make inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Show Cause notice, it is nowhere mentioned that the alleged person has provided any entry to the assessee directly. We note that the ld Counsel has provedthatassessee is a regular investor in shares and securities. The shares were purchased and sold through a Registered Broker named "Eureka Stock & Share Broking Services Ltd." in the Stock Exchange. The shares were purchased and sold based on the prevailing market condition. The payments were received through proper banking channel. The purchase and sale transactions were subjected to Security Transaction Tax (STT), Service Tax, Brokerage charges and Stamp duty. The share purchase and sale transactions are reflected in the DMAT account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange.It is clear from the above that the facts of the case of the assessee are identical with the facts in the cases wherein the co-ordinate benches of this Tribunal has deleted the addition and allowed the claim of LTCG. The assessee`s case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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