TMI Blog2021 (7) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... are based upon presumption and surmises simply concluding that the case was within the ambit of 'Penny Stocks' not having any place under the provisions of tax laws. 3. That the learned CIT(A) /A.O. failed to appreciate that the transaction of purchase / sale were genuine and all the requisite prescribed conditions were in existence and hence the addition / disallowance has no legs to stand and deserves to be held ab initio null void. 4. That the authorities below failed to appreciate that the appellant is simply a genuine customer and the transaction was made through proper D-Mat account and the sale purchase effected per approved share brokers and cannot be held to be accountable simply on the basis of 'quite unusual and unbelievable' based upon imagination and baseless grounds. 5. That the revenue authorities failed to appreciate that for losses the entire burden is on the appellant's shoulders and to the contrary the gains are held 'non genuine' which is against the principle of equity, justice and good conscience. 6. That the Ex Parte order based u/s 144 of the IT. Act 1961 is a straight denial of a reasonable and suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i High Court in the case of Pr. CIT vs. Smt. Krishna Devi in I.T.A. No.130/2020, under similar facts and circumstances, has dealt with the issue of abnormal rise in price and after considering the case law of Hon'ble Supreme Court in the case of Sumati Dayal Vs CIT [1995] 214 ITR 801, [which has been relied on by learned CIT(A)], has dismissed the theory of preponderance and has relied on the theory of evidence and has dismissed the appeal of the Revenue. It was submitted that various benches of the Tribunal including the Lucknow Bench, under similar facts and circumstances, have already decided the issue in favour of the assessee in the following cases: i) Shri Deepak Kumar Agarwal Vs. ACIT Central Circle - 3(1), IN IT(SS)A Nos. 125 I26 /KOL/2018 dated 10-05-2019 A.Y 2013- 14 2014-15 decided by the ITAT 'B' Bench Kolkata relating to M/S Sulabh Engineering Services Ltd (SESL). ii) Sanjay Kumar Agarwal (HUF) Vs. ITO Ward 48(4) Kolkata in ITA No. 2378/Kol/2018 dated 07-08-2019 decided by the ITAT SMC Bench Kolkata relating to M/S Sulabh Engineering Services Ltd.(SESL). iii) Suman Kothari Vs. ITO Ward 36(2) Kolkata in ITA No. 2467/Kol/201 Tdated 10-05-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the documentary evidence which the assessee had filed before the Assessing Officer for claiming exemption u/s 10(38) of the Act. In support of the claim for purchase of shares from Anant Fin Consultancy (P) Limited, the assessee had filed a copy of sale bill in favour of the assessee wherein the said broker had sold 15,000 shares to the assessee for ₹ 21/- per share, a copy of such sale bill is placed at page 24 of the paper book and a copy of ledger account of the assessee appearing in the books of Anant Fin Consultancy (P) Limited, placed at page 25 of the paper book wherein it has been confirmed that an amount of ₹ 3,15,000/- was received from the assessee against the sale of 15,000 shares to the assessee. Such amount of ₹ 3,15,000/- was debited to the bank account of the assessee maintained with United Mercantile Co-operative Bank Ltd., a copy of which is placed at page 23 of the paper book. Such 15,000 shares purchased by the assessee became 1,50,000 shares of face value of ₹ 1/-, the evidence of split of the shares from ₹ 10/- each share to ₹ 1/- each share is placed at pages 17 18 of the paper book. Such 1,50,000 shares were credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case law of Sanjay Bimalchand Jain vs. Pr. CIT, decided by Hon'ble Bombay High Court. As regards the decision of Sumati Dayal vs CIT (supra), the Hon'ble Delhi High Court in a recent judgment in the case of Pr. CIT vs. Smt. Krishna Devi, under similar facts and circumstances, has disregarded the principle of preponderance and has held that evidence produced by the assessee over power the principle of preponderance. In the case law decided by Hon'ble Delhi High Court in the case of Krishna Devi, the Tribunal allowed relief to the assessee on Long Term Capital Gain on the scrip of Goldline International Finvest Ltd. which appear at Sl.No.24 of the investigation report. The findings of Hon'ble Delhi High Court are reproduced below: 3. The present appeals under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as the Act ] are directed against the common order dated 6th August, 2019 [hereinafter referred to as the Impugned Order ] passed in ITA No. 1069/DEL/2019 (for AY 2014-15), 2772/DEL/2019 (for AY 2015- 16) and other appeals for the same AYs, by the Income Tax Appellate Tribunal [hereinafter referred to as the ITAT ]. However, the Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. xx xx xx 23. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer conducted any enquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. The report of Investigation Wing is much later than the dates of purchase / sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhere SEBI has declared the transaction transacted at earlier dates as void. xx xx xx 30. Considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the DR would do no good on the peculiar plethora of evidences in respect of the facts of the case in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand. 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6 th September, 2019, the appeals a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain s submissions relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and not on suspicion alone. The Hon'ble court further distinguished the judgment in the case of Suman Podar which was in favour of Revenue. The Hon'ble court further held that case of Sumati Dayal u/s CIT was also not applicable to the assessee. The Hon'ble court further held that reliance placed by the Assessing Officer on the investigation report of Investigation Wing without further corroboration on the basis of cogent material does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. 6. As regards the reliance placed by Learned CIT(A) on the case of Sanjay Bimalchand Jain decided by Hon'ble Bombay High Court, we find that the above said case law has been distinguished by Hon'ble I.T.A.T. Kolkata Bench in ITA No. 2243/Kol/2017 where the Hon'ble Tribunal vide para 31 held as under: 31. We note that the Id. D.R. had heavily relied upon the decision of the Hon'ble Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017. We note that in the case relied upon by the Id. D.R, we find that the facts are different from the facts of the case in hand. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinguishable by Hon'ble Delhi Tribunal in the case of Karuna Garg in I.T.A. No.1069/Lkw/2019 and further in the case of Swati Luthra vs. Income Tax Officer in I.T.A. No.6480/Lkw/2019, dated 28/06/2019. In these two cases the Hon'ble Tribunal has again allowed relief to the assessee though from a different script but in the decisions they have held that the judgment of Hon'ble Delhi High Court in Udit Kalra was distinguishable as in that case the Hon'ble High Court has only dismissed the appeal as the Hon'ble High Court found that the issue involved was only a question of fact. In this respect, para 28 of the Tribunal order in the case of Karuna Garg is relevant which is reproduced below: 28. The DR heavily relied upon the judgment of Hon'ble High Court of Delhi in the case of Udit Kalra Vs. ITO in ITA No.220/2019. We have carefully perused the order of the Hon'ble High Court and on going through the said judgment we find that no question of law was formulated by the Hon'ble High Court of Delhi in the said case and there is only dismissal of appeal in limine as the Hon'ble High Court found that the issue involved is a question of fact. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 relied by ld DR. Therefore, the above case laws relied on by learned CIT(A) is not applicable to the facts and circumstances of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o years. The copy of bank account wherein the proceeds were credited is placed at pgs. 2 to 8 and 2 to 10 respectively for both years. From the contract notes issued by the broker India Infoline Ltd. we find that assessee had paid service tax and STT and shares were sold through screen based transactions wherein the exact time and order numbers are mentioned. The copy of Demat statement of assessee shows credit of ten lac shares and on sale of 1,11,700 during the AY 2014-15 the balance is reflected at 8,88,300 shares as on 31/03/2014 (PB-26) and on sale of 30,000 shares during AY 2015-16, balance shares are reflected at 8,58,300 as on 31/03/2015 (PB-27). These balance shares of 8,58,300 are reflected in the Demat statements upto 31/03/2019. From the Demat statement, we further observe that assessee was holding certain other scrips also. The assessee, therefore, had filed sufficient evidences to prove the genuineness of the transactions but authorities below has rejected the claim of the assessee on the basis of an investigation report of the Department whereby the scrip was held to be penny stock which was being used for providing bogus long term gains. We find that the Kolkata Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings details and evidences in support of purchase and sale of shares as asked for have been submitted before the learned Assessing Officer from time to time. However, the ld. Assessing Officer has treated the transaction in equity shares of M/s Sulabh Engineering and Services Ltd. as bogus and added ₹ 1,12,13,010/- being Long Term Capital Gain on sale of such equity shares only on the basis of his suspicion without bringing any adverse material on record in support of his contention in spite of the fact that the sale transactions have been done through recognized exchange through the authorized broker and all relevant supporting documents have been submitted before the learned Assessing Officer. Further, learned Assessing Officer has also added ₹ 56,065/- on account of undisclosed commission payment @ 0.5% of the Long Term Capital Gain that had been assumed to be incurred to arrange bogus Long Term Capital Gain amounting to ₹ 1,12,13,010/-. We note that the scripts / equity shares of M/s Sulabh Engineering and Services Ltd. has been dealt with by the SMC Bench of this Tribunal in the case of Vasudha Jain, in ITA No.1018/Kol/2018, for A.Y. 2015-16, orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :- (i) ITO vs. Ashok Kumar Bansal ITA No. 289/Agr/2009 (Agra ITAT) (ii) ACIT vs.Amita Agarwal Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (iii) Lalit Mohan Jalan (HUF) vs. ACIT ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT [2006] 6 SOT 247 (Mum) 15. We note that the ld. D.R. had heavily relied upon the decision of the Hon ble Bombay High Court in the case of Bimal Chand Jain in Tax Appeal No. 18 of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer and CIT(A) had not allowed claim of the assessee of long term capital gain on the scrip M/s Gold Line International Finvest Ltd. In I.T.A. No. 130 and 131 similar claim was made on scrip of M/s Eastern Bio Organic Food Processing Ltd. and on scrip of Rander Corporation Ltd. The authorities below had not allowed claim of the assessee on the basis of same investigation report on the basis of which claim of the assessee has been rejected. These scrips are mentioned at Sl. No. 24, 19 and 49 in the list of penny stocks prepared by investigation team. The Tribunal however allowed relief to the assessee by separate orders which were confirmed by Hon'ble Delhi High Court. The relevant findings of Hon'ble court are reproduced below: 3. The present appeals under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as the Act ] are directed against the common order dated 6th August, 2019 [hereinafter referred to as the Impugned Order ] passed in ITA No. 1069/DEL/2019 (for AY 2014-15), 2772/DEL/2019 (for AY 2015- 16) and other appeals for the same AYs, by the Income Tax Appellate Tribunal [hereinafter referred to as the ITAT ]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. xx xx xx 23. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , neither the Assessing Officer conducted any enquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. The report of Investigation Wing is much later than the dates of purchase / sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhere SEBI has declared the transaction transacted at earlier dates as void. xx xx xx 30. Considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the DR would do no good on the peculiar plethora of evidences in respect of the facts of the case in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand. 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6 th September, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astoundin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspectus 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. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain s submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence and proof, and not on suspicion alone. The Hon'ble court further distinguished the judgment in the case of Suman Podar which was in favour of Revenue. The Hon'ble court further held that case of Sumati Dayal u/s CIT was also not applicable to the assessee. The Hon'ble court further held that reliance placed by the Assessing Officer on the investigation report of Investigation Wing without further corroboration on the basis of cogent material does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. 11. In view of above facts and circumstances and in view of judicial precedents, Ground Nos. 3 and 4 are allowed in ITA No. 475/Lkw/2019 and Ground No. 1, 2, 5 6 were not argued, therefore, same are dismissed as not pressed. In view of above, appeal in ITA no. 475/Lkw/2019 is partly allowed. 12. As regards, appeal in ITA No. 681/Lkw/2019, Ground Nos. 5 and 6 are allowed. Ground Nos. 1 to 4 and ground No. 7 to 8 were not argued, therefore, these grounds are dismissed as not pressed. As regards ground No. 9 and 10, the Assessing Officer had made additions u/s 69C as deemed commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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