TMI Blog2021 (6) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered broker and shares have been transferred from Demat account which were held for more than 12 months, the assessee is eligible for the exemption u/s 10(38) of the Act for Long Term Capital Gain and thus no addition was called for u/s 68 as well as the addition for estimated brokerage expenses. - Decided in favour of assessee. - ITA No.288/Ind/2019, ITA No.410/Ind/2019 - - - Dated:- 25-5-2021 - Hon ble Manish Borad, Accountant Member And Hon ble Madhumita Roy, Judicial Member For the Assessee : Shri S.N. Agrawal, CA For the Revenue : Shri Harshit Bari, Sr.DR ORDER PER BENCH The above captioned appeals filed at the instance of the assessee(s) for Assessment Year 2014-15 are directed against the orders of Ld. Commissioner of Income Tax(Appeals)-II (in short Ld. CIT], Indore evenly dated 18.01.2019 which are arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the Act ) dated 26.12.2016 15.12.2016 framed by ITO-4(4) ITO-4(3), Indore respectively. 2. Assessee(s) has raised following grounds of appeal:- (i) Shri Hakimuddin Khambati ITA.No.288/Ind/2019 Assessment Year 2014-15 1. That on the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long term capital gain as earned on sale of shares by treating it as income from undisclosed sources without properly appreciating the facts of the case and submissions made before him more so when the appellant had filed ample documents so as to justify the genuineness of long term capital gain which were never disproved by the assessing officer. 2. That on the facts and circumstances of the case and in law the learned CIT(A) erred in maintaining the addition made by the assessing officer on account of long term capital gain as eared on sale of shares on the basis of third party documents/statements which were never confronted with the appellant and against which an opportunity of cross examination was also not allowed to the appellant. 3. That on the facts and circumstances of the case and in law the learned CIT(A) erred in maintaining the interest charged by the assessing officer under section 234B and 234C of the Act. 4. The Appellant craves leave to add to, alter and modify the grounds of appeal as taken by her. 3. Brief facts of the case as culled our from the records in the case of the assessee namely Shri Hakumuddhin Khambati is that he is an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Gain were asked to be furnished. Assessee duly submitted complete details of the transaction from purchase till receiving the sale consideration in the bank account. Ld. A.O was not satisfied and he based on the search and seizure operation carried out in the case of Mr. Vipul Vidur Bhatt and his related entities and their admission to be engaged in providing the accommodation entries to various beneficiaries on commission specifically with regard to the script of Sunrise Asian Ltd came to a conclusion that Kappac Pharma Ltd is a penny stock company and also doubted the huge profit made from sale of equity shares of small penny stock company. He further referring to the investigation reports carried out by the Investigation Wing with some sub brokers who are fraudulently misusing the portal of BSE and electronic media provide accommodation entry in the form of Long Term Capital Gain which in his view are bogus and does not entitle the assessee to claim the benefit u/s 10(38) of the Act. Ld. A.O accordingly added back the Long Term Capital Gain of ₹ 20,70,496/-and assessed income at ₹ 35,32,506/-. 5. From perusal of the above stated facts and the grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the opportunity of cross examination was not awarded to the assessee, emphasis was laid on the judgment of Hon ble Supreme Court in the case of Andaman Timber Industries V/s CCE Civil Appeal No.4228 of 2006 and also another judgment of Hon ble Apex Court dated 28.3.2018 dismissing the special leave petition filed by the revenue in the case of CIT V/s Sunita Dhadda (2018) 101 CCH 0277 ISCC confirming the view taken by the lower authorities that no addition could be made to the total income of the assessee if opportunity of cross examination is not provided to the assessee. 10. Per contra Ld. Departmental Representative referring to the finding of lower authorities and decisions referred by Ld. CIT(A) reliance was also placed on the judgment of Hon ble High Court of Delhi in the case of Suman Poddar Vs. ITO ITA No.841/2019 dated 17.09.2019. 11. We have heard rival contentions and perused the records placed before us and carefully gone through the detailed written submissions and paper book running from page 1 to 538 in the case of assessee namely Shri Hakimuddin Khambati and written submission and paper book running from page 1 to 584 in the case of assessee namely Smt. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvicesduly confirming the sale of 4000 equity shares of M/s Turbotech Engineering Limited to the appellant 74 3 Copy of demat statement of the appellant with M/s Arihant Capital Markets Limited for the period from 01.04.2013 to 21.10.2016 75 4 Copy of balance sheet and capital account of the appellant as on 31st March, 2013 duly highlighting the investment as made by the appellant in the shares of M/s Turbotech Engineering Limited. 76 5.1 Copy of sale note dated 11.07.2013 in connection with sale of 3,600 equity shares as issued by M/s Arihant Capital Markets Limited 77-78 5.2 Copy of sale note dated 18.07.2013 in connection with sale of 400 equity shares as issued by M/s Arihant Capital Markets Limited 79-80 6 Copy of ledger account of the appellant in the books of M/s Arihant Capital Markets Limited for the previous year 2013-14. 81 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 merely extracted copies of their statement in the assessment order only. The Ld. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the assessee, she was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to all the persons who have brought the scrips in the entire country. Thus, under these circumstances, atleast some inquiry should have done from these persons, whether they have provided any entry to the assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal. 14. That the ld DR during the course of hearing placed heavy reliance on judgment of Hon'ble High Court of Delhi in the case of Udit Kalra vs ITO in ITA No. 220/2019. Relevant extracts of said judgment are extracted as below: The assessee is aggrieved by the concurrent findings of the tax authorities - including the lower appellate authorities rejecting its claim for a long term capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relied by ld DR. 16. We further find that Ld. AO has also mentioned about some order of SEBI. This order also was never confronted to the appellant during assessment proceedings. Moreover, the said order seems to be passed in year 2015, whereas the appellant had purchased the shares in year 2011 and 2013 and sold them in year 2014. It was evident from this document only that no action has been taken by the SEBI against the company during the period when the appellant holds the shares. Thus, even otherwise, we find that the order of SEBI so relied by ld. AO and CIT (A) is not applicable for the transactions under consideration. In any case as stated above, the SEBI in its subsequent decision has absolved most of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares 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 the appeal in ITA No. 6480/Del/2017 shall apply to the other appeals of different assessees with the same force in ITA Nos. 6481 to 6483/Del/2017. 19. In the result, the appeal of all the above four assessees, namely, Smt. Swati Luthra, Smt. Shruti Luthra, Smt. Namata Sehgal Luthra and Smt. Asha Luthra bearing ITA No. 6480 to 6483/Del/2017 are allowed. 17. We further find that ratio laid down by Hon'ble High Court of Delhi in the case of Pr. CIT vs. Smt. Krishna Devi (Supra) is also favourable to the assessee. As in the case of assessee also there was no evidence produced by the Ld. AO to show that there was an agreement between assessee and any other party which are alleged to be involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion 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 record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels. The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the considered view that the claim of LTCG u/s 10(38) of the Act at ₹ 97,02,036/-from sale of equity shares of Terbotech Engineering Limited is genuine and the assessees is entitled to claim the benefit. Thus, no addition at ₹ 99,78,000/- was called for u/s 68 of the Act for unexplained cash credit. We, further hold that the assessee is regularly dealing in equity shares as an investor and as its main source of income salary and other from other sources and the frequency of transactions in purchase and sale of shares is less, it cannot be held to be carrying on business of purchase/sale of shares as an adventure in nature of trade. 19. In the result, all the grounds raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 record, held that the Respondent had successfully discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 abovestated 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. 16. In the light of above judgment of Hon ble Delhi High Court in the case of PCIT v/s Smt. Krishna Devi (supra), we find that the same is also favourable to the assessee(s) since the Ld. A.O has not indicated or brought on record any evidence which could prove that the assessee(s) are having any link with the alleged brokers/sub br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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