TMI Blog2021 (6) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... shares as an adventure in nature of trade. - Decided in favour of assessee. - ITA No. 149/Ind/2019 - - - Dated:- 25-5-2021 - Manish Borad, Member (A) And Madhumita Roy, Member (J) For the Appellant : Girish Agrawal, Nisha Lahoti and Vijay Bansal, ARs For the Respondents : Harshit Bari, Sr. DR ORDER Per Manish Borad, AM The above captioned appeal filed at the instance of assessee pertaining to Assessment Year 2014-15 is directed against the order of Commissioner of Income Tax (Appeals)-II (in short 'Ld. CIT'], Indore dated 26.12.2018 which is arising out of the order u/s. 143(3) of the Income Tax Act 1961(In short the 'Act') dated 16.12.2016, framed by ACIT-5(1), Indore. 2. The assessee has raised following grounds of appeal: 1. That the order passed by Ld. CIT(A) is bad in law and on facts. 2. That the Ld. CIT(A) has erred in confirming the addition of ₹ 97,49,239/- under section 68, which is quite unjust, illegal and against the facts of the case. 3. That the Ld. CIT(A) has erred in holding that the genuine income of Long Term Capital Gain exempted u/s. 10(38) of ₹ 97,49,239/- is a sham transaction, by applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-13 at ₹ 2,75,964/-. Assessee in support of the claim of exempt income u/s. 10(38) of the Act filed various documents including contract note for purchase and sale and DMAT account. However, the Ld. AO based on its observation of the financial statements of Turbotech Engineering Limited (in short TEL) and the statement given by the assessee, came to a conclusion that the assessee had no knowledge about Turbotech Engineering Limited and purchased it on advice of a person whose name is not known. Share prices of 'TEL' increased abnormally which were not supported by gross sales/net profit/financial strength of the company. He, therefore, concluded that 'TEL' is a 'penny stock' company and assessee has managed bogus Long Term Capital Gain (LTCG) to evade tax. Ld. AO accordingly added the sale value of equity shares at ₹ 99,78,000/- as addition u/s. 68 of the Act for unexplained cash credit. Income assessed at ₹ 4,44,77,800/-. 4. Aggrieved assessee preferred an appeal before the Ld. CIT(A) but failed to succeed. Ld. CIT(A) confirmed the view of the Ld. Assessing Officer placing reliance on various decisions holding that the assessee had in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not engaged in the business of share, as the assessee is mainly engaged in the capacity of a director in the company and transactions of purchase and sale of equity shares are done occasionally. List of decisions relied are reproduced below: 1. Sona Builders-[2001] 119 Taxman 430-dated 24.07.2001 (SC) 2. Krishna Devi-ITA No. 125 of 2020 dated 15.01.2021 (Delhi HC) 3. Uttamchand Jain- [2009] 182 taxman 243-dated 02.07.2009 (Bombay HC) 4. Swati Luthra- [2020] 115 taxmann.com 167-dated 28.06.2019 I.T.A.T., Delhi) 5. Lalchand Bhagat Ambica Ram [1959] 37 ITR 288 (SC) 6. Shakti Hardware Collections Private Limited-ITA No. 6301/MUM/2014 (I.T.A.T. Mumbai) 7. Achal Gupta-ITA No. 501/LKW/2019-dated 16.12.2020 (I.T.A.T., Lucknow) 8. Aditya Mundra-ITA No. 632/IND/2019 dated 13.01.2021 (I.T.A.T., Indore) 9. Shweta Agrawal-ITA No. 280/IND/2019 dated 21.12.2020 (I.T.A.T., Indore) 10. GTC Industries Limited- [2017] 80 taxmann.com 284 dated 07.03.2017-(I.T.A.T., Mumbai (SB) 11. Riaz Munshi-ITA no. 8314/DEL/2018 dated 11.03.2020 (I.T.A.T., Delhi) 12. Dipesh Ramesh Vardhan-ITA No. 7648/Ind/2019 dated 11.08.2020 (I.T.A.T., Mumbai) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se shares were held in the pool account of the broker which were subsequently transferred to the DEMAT Account in name of assessee maintained with Arihant Capital Markets Limited. After holding the shares for more than 12 months the assessee sold these equity shares through the broker Arihand Capital Markets Limited having SEBI No. INB/INF230783938. The shares of 'TEL' are listed on Bombay Stock Exchange. During the F.Y. 2013-14, 22,000 shares were sold in parts and contract notes are placed at page 12 to 22 of the paper book. Gross sale value is ₹ 99,78,000/-. The net long term capital gain comes to ₹ 97,02,036/-. Source of sale consideration is not in dispute as it came through a registered broker directly in the bank account of assessee and sale effected on portal of Registered Stock Exchange where identity of Buyer and Seller is not disclosed. 13. We further note that both the lower authorities had not disputed any of the documents mentioned above i.e. a contract note at the time of purchase and sale, DEMAT account, financial ledger, share prices appearing on the portal of Bombay Stock Exchange as on the date of purchase/sale. Rather than disputing any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Revenue could not point out any specific defect with regards to the documents so submitted by assessee. In our considered view, effect of a transaction which is supported by documentary evidences cannot be brushed aside on suspicion or probabilities without pointing out any defect therein. 13. In the instant case, the Assessing Officer himself observed that the movement in price of shares of M/s. Esteem Bio and M/s. Turbotech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the Assessing Officer but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. Further, we also find from record that Ld. AO also didn't confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise 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. In view the above, we are of the opinion that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that no substantial question of law arises in the present appeal. This appeal is accordingly dismissed. 15. On going through the aforesaid judgment, we find that no question of law was formulated by Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine and the Hon'ble High Court found that the issue involved is a question of fact as held by Hon'ble Apex Court in Kunhayyammed vs. State of Kerala reported in 245 ITR 360 and also in CIT vs. Rashtradoot (HUF) reported in 412 ITR 17. Even on merits and facts, the said judgment in the case of Udit Kalra vs. ITO (supra) is distinguishable as in that case the scrips of the company were delisted on stock exchange, whereas, in the instant case, the interim order of SEBI in the cases of M/s. Esteem Bio and M/s. Turbotech have been cooled down by subsequent order of SEBI placed by assessees in its paper book. Thus, the case of Udit Kalra vs. ITO relied by ld. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Thus, we hold that the case of assessee is factually and materially distinguishable from the facts of the case of Udit Kalra vs. ITO so r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee should have been brought on record to put assessee under liability. However, in the present case, the entire documentary evidence on record has not been disputed by the authorities below and there is no rebuttal to the explanation of assessee. No other adverse materials have been brought on record against the assessee. Further, no proper enquiry has been conducted by the A.O. on the documentary evidences filed by assessee. Whatever statements have been referred to in the order was general in nature with whom assessee did not have any transaction. Considering the totality of the facts and circumstances of the case, we hold that assessee has entered into genuine transaction of sale and purchase of shares and therefore, satisfied the conditions of Section 10(38) of the I.T. Act. The assessee is entitled for exemption under the same provision. We accordingly, set aside the orders of the authorities below and delete the addition of ₹ 41,85,762/-. Appeal of assessee is allowed. 18. The facts of the cases of other assessee's are similar to the facts involved in the case of the present assessee i.e. Smt. Swati Luthra, therefore, our findings given in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation 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 take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed. 18. We, therefore, respectfully following the ratio laid down by Hon'ble High Court of Delhi in the case of Krishna Devi (supra) and the decision of Coordinate Bench in the case of Swati Luthra (supra) which is squarely applicable on the facts and issues raised before us, are o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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