TMI Blog2021 (7) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... entire aspect of the matter in the absence of any independent enquiry made by the Ld. A.O as already observed by us respectfully relying upon the judgment passed by Hon ble Delhi Bench in the case of Swati Luthra [ 2019 (7) TMI 526 - ITAT DELHI] on the identical facts keeping in view of the orders passed by SEBI, we do not hesitate to observe that holding the said M/s Turbo Tech Engineering Ltd as a penny stock company by the authorities below without any corroborative evidence is uncalled for and unjustified. Such action is erroneous arbitrary whimsical and suffers from the principle of surmise and conjecture. Thus, the disallowance of the claim made by the assessee towards the Long Term Capital Gainbeing bogus based only on mere surmise and conjecture.Thus, the disallowance of the claim made by the assessee towards the Long Term Capital Gain is bad in law and liable to be quashed. Consequentially the addition of 3% of brokerage is also of no basis - Decided in favour of assessee. - ITA No.7/Ind/2019, ITA No.8/Ind/2019, ITA No.29/Ind/2019, ITA No.30/Ind/2019, ITA No.113/Ind/2019 - - - Dated:- 25-6-2021 - Hon ble Manish Borad, Accountant Member And Hon ble Madhumita Roy, J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Gain exemption is bogus; in fact no real capital gain have been earned by the assessee as the observation made by Ld. A.O, rather the same has been introduced from undisclosed sources. Ultimately the exemption on account of Long Term Capital Gain to the tune of ₹ 23,25,000/- on the said alleged penny stock was not accepted and added to the total income of the assessee u/s 68 of the Act on the alleged grounds of income from undisclosed sources. The Ld. A.O further increased the brokerage and commission @3% of the transaction at ₹ 69,750/- alleging managing of the transaction of Long Term Capital Gain u/s 68 of the Act. These Additions were further been confirmed by Ld. CIT(A)-II, Indore. Hence, the instant appeal before us. 3. At the time of hearing of the instant appeal Ld. Counsel for the assessee submitted before us as follows:- 1) The Genuineness of transaction was sought to be proved before the Revenue with help of following evidences:- (i) Statement of Long Term Capital Gain. (ii) Debit note for purchase of shares of Turbo Tech Engineering Limited. (iii) Physical Share Transfer form evidencing shares of Turbo Tech Engineering Limited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which Chapter-VII of the Finance Act, 2004 comes into force and such transaction is chargeable to security transaction tax under that Chapter. 8. In the present case, both twin conditions are satisfied. The appellant has purchased the 5000 shares through broker Shah Space Manager Pvt. Ltd, Vadodra and sold the shares holding the same for more than 12 months and therefore it is long term capital asset and the shares are equity shares of M/s Turbo tech Engineering Ltd. Before the authorities below the appellant filed the copy of the shares transfer form, copy of contract note issued by Anand Rathi Shares and Stock Brokers, copy of form evidencing payment of securities transaction tax on transaction entered in a recognized stock exchange, as submitted by Ld. AR. Needless to mention that those documents are filed before us by way of a Paper Book. 9. It is further submitted that the share price is always determined by the market mechanism at any given point of time because there is a robust system of the stock exchange which is transparent, open and equitable, and the appellant has also sold the shares on such a platform at a price which was a reflection of the market price de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m in respect of bogus transactions of capital gain. However, nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the appellant was in collusion with them. No finding specifically against the appellant has been made in the Investigation team the report whereof is available before us and this cannot be any ground for holding the appellant guilty or linked to the wrong facts of the persons investigated. 16. In the instant case, the appellant is not connected with M/s Turbo Tech Engineering Ltd. or their promoters, directors or any other person who exercised any control over M/s Turbo tech Engineering Ltd or any so-called entry operator. As a matter of fact, no element is available showing that the appellant has indulged in any such questionable activity or has been part of the modus operandi as alleged by the Ld. A.O. 17. It is further apparent from Page 36 of the Paper Book filed before us that the appellant earned Long Term Capital Gain in ICI CI Bank, transactions whereof has not been doubted. 18. No independent Enquiry from concerned parties to transaction has also been made by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asha Luthra Date of Investment 27.12.2011 27.12.2011 27.12.2011 27.12.2011 No. of Shares purchased 10000 10000 10000 10000 Purchase price per share ₹ 2 per ₹ 2 per ₹ 2 per ₹ 2 per share Total purchase consideration paid ₹ 20, 000/- ₹ 20, 000/- ₹ 20, 000/- ₹ 20, 000/- Date of shares sold 23.07.2013 06.09.2013 19.10.2013 24.09.2013 (3000 shares), 03.09.2013 (3000 shares) and 10.09.2013 (4000 shares) (10000 shares) (10000 shares) Sale Price per share ₹ 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,50,000/- ₹ 1,50,000/- ₹ 1,50,000/- - Date of shares sold 25.02.2014 14.03.2014 (26.03.2014 (2400 shares), 6000 shares) 4800 shares) 26.02.2014 (2400 shares) and 03.03.2014 (1200 shares) Sale Price per share ₹ 376.22, ₹ 424.154 ₹ 487.50 ₹ 383.62 per share per share and ₹ 397.50 per share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide bogus LTCG to various 8 beneficiaries. Reliance was placed on various statements, like of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar, which were all recorded before DDIT (Inv), Kolkata, wherein, the aforesaid persons had admitted that the scrip of M/s Esteem Bio and M/s Turbotech were used to provide bogus LTCG to various beneficiaries. Thereafter, the Assessing Officer after explaining the modus operandi of bogus LTCG held that the transactions of the assessee were sham transactions and the LTCG so declared of a sum of ₹ 41,85,762/- was nothing but unexplained Cash Credit under section 68 of the Act to be taxed @ 30% under section 115BBE of the Income Tax Act, 1961 in the hands of the assessee. 6. In the first appeal, the Ld. Commissioner of Income Tax (Appeals) confirmed the order of the AO by observing that the documents submitted as evidence to prove the genuineness of the transaction are make believe documents to cover up the true nature of the transactions, as it is revealed that the purchase and sale of shares are arranged transactions to create bogus profit in the garb of LTCG by well-organized netwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) that increase in the price of M/s Esteem and M/s Turbotech was without any backing of the Financial Results is immaterial as the assessee had sold the shares on recognized stock exchange through a recognized stock broker and the prices of shares duly listed on stock exchange are not in control of assessee and nor any such allegation has surfaced on record that the assessee is involved in price manipulation of aforesaid scrips. He further submitted that reliance placed by AO on the interim order of SEBI, wherein, trading in securities of M/s Esteem Bio and M/s Turbotech were suspended temporarily is misconceived, as vide Adjudication Orders dated 06.09.2017 in the case of M/s Esteem Bio and 25.11.2014 in the case of M/s Turbotech, SEBI has found no irregularities in the trading of such scrips nor it has found its directors involved in any price rigging (said orders were placed in the paper book at pages 3 to 13 and 14 to 18 of PB II) and thus, the reliance placed by AO on interim order of SEBI is uncalled for and unjustified. It was further argued that the AO has relied on various statements of alleged entry operators which have surfaced directly in the order of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayan Agrawal reported in 219 Taxman 126 dated 16.01.2013. Copy of order of Hon ble ITAT Raipur in the case of DCIT vs Rakesh Saraogi Sons (HUF) in ITA No. 93 to 99/RPR/2014 dated 16.04.2018. Copy of order of Hon ble ITAT Mumbai in the case of ITO vs M/s Arvind Kumar Jain (HUF) in ITA No. 4862/Mum/2014 dated 18.09.2017. Copy of order of Hon ble ITAT Jaipur in the case of Sh. Pramod Jain vs ITO in ITA No. 368/Jp/2017 dated 31.01.2018. Copy of order of Hon ble ITAT Delhi in the case of Shobhit Goel (HUF) in ITA No. 2021/Del/2018 dated 13 25.09.2018. Copy of order of Hon ble ITAT Delhi in the case of Smt. Sunita Khemka vs ACIT in ITA No. 389/Del/2018 dated 02.08.2018. Copy of order of Hon ble ITAT Delhi in the case of Chander Prakash vs ITO in ITA No. 6880/Del/2017 dated 12.03.2018. Copy of order of Hon ble ITAT Kolkata in the case of Prakash Chand Bhutoria vs ITO in ITA No. 2394/Kol/2017 dated 27.06.2018. Copy of order of Hon ble ITAT Delhi in the case of Mukta Gupta vs ITOin ITA No. 2766/Del/2018 dated 26.11.2018. Copy of order of Hon ble ITAT Kolkata in the case of Mahavir Jhanwar vs ITO in ITA No. 2474/Kol/2018 dated 01.02.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DR is clearly distinguishable on facts and is not applicable to the facts of assessee. Rather the case laws so relied by assessee are directly applicable to the facts of assessee which have not been rebutted by ld DR. 12. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. We find that the transactions of the assessee of purchase of shares of M/s Esteem Bio and M/s Turbotech., holding of the shares for more than one year and the sale of shares through a registered share broker in a recognized Stock Exchange and payment of Securities Transaction Tax thereon, all were supported by documentary evidences which were placed before the lower authorities. 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 16 Turbotech were without any backing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to cross examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal 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 18 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 determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm capital gain claim in the returns which are the subject matter of the present appeal. This court has considered the submissions of the parties. Aside from the fact that the findings in this case are entirely concurrent A.O., CIT(A) and the ITAT have all consistently rendered adverse findings what is intriguing is that the company (M/s Kappac Pharma Ltd.) had meagre resources and in fact reported consistent losses. In these circumstances, the astronomical growth of the value of company s shares naturally excited the suspicions of the Revenue. The company was even directed to be delisted from the stock exchange. Having regard to these circumstances and principally on the ground that the findings are entirely of fact, this court is of the opinion 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 Kunha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken us through various documents filed in the paper book as referred to above which specifically prove the purchase of shares made by assessee genuinely which were also sold genuinely. The transactions were carried through Demat account and banking channel on which STT has been paid by assessee. The report of the SEBI was not adverse in nature against the assessee because name of the assessee did not appear therein for conducting dubious transaction. The report of the Investigation Wing and other material was neither confronted to assessee nor there was any inquiry from where it transpired that assessee was beneficiary of any bogus long-term capital gain; therefore, the same cannot be read in evidence against the assessee. A specific material against 22 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 file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be drawn against the assessee. In fact there is hardly any chance to doubt or suspect that the transactions in purchase or sale are not genuine. These identical facts were also available in the case of Swati Luthra (Supra). In the instant case the entire transaction was carried out through the Demat account and banking channel upon which STT has been paid by the assessee before us. In order to hold the transaction is bogus and / or ingenuine, the Assessing Officer is required to bring in cogent/clinching evidence to prove the same. It is pertinent to mention that no observation is forthcoming from the orders passed by the revenue pointing out any material defect in the procedure followed by the assessee in such purchase and sale of the shares in question. Neither any cogent/corroborative evidence is brought on record by the revenue to hold otherwise and therefore, there is no doubt that the Assessing Officer has merely proceeded to arrive at his conclusion that the transaction being bogus based only on mere surmise and conjecture. 22. Thus, taking into consideration the entire aspect of the matter in the absence of any independent enquiry made by the Ld. A.O as alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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