TMI Blog2021 (2) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. - Decided in favour of assessee. - ITA No. 475 & 681/Lkw/2019 - - - Dated:- 16-2-2021 - SHRI A.D JAIN, VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER For the Appellant : Shri Rakesh Garg, Advocate For the Respondent : Shri Ajay Kumar, DR ORDER PER BENCH: These are two appeals filed by the assessee against the separate orders of ld. CIT(A) dated 26.07.2019 and 18.10.2019 respectively for AYs. 2014-15 and 2015-16. 2. The assessee has taken similar grounds in these appeals, which includes both on legal issues as well as on merits of the case. These appeals were heard together and therefore for the sake of convenience a common and consolidated order is being passed. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evalent in the stock exchange at the relevant time; i) The transactions were Security Transaction Tax (STT) paid and thus, requirement of condition for exemption as contained in section 10(38) had been fully complied with; j) In addition to payment of brokerage, service tax had also been paid by the appellant through bills issued by the brokers; k) Other material, facts and circumstances of the case, the appellant's claim for exemption under section 10(38)was liable to be allowed; l) The AO failed to appreciate that the amount received on sale of shares is neither sale nor an advance; m) The amount received, being properly explained, neither being unexplained nor undisclosed; the appellant's claim for exemption u/s 10(38) be allowed. 5. Because the CIT(A) has erred on facts and in law in holding that merely because the buyers of shares were shell companies as per the imagination of the revenue, and based on the statements given by the brokers at the back of the appellant, the appellant's claim for exemption u/s 10(38) could not have been disallowed, the order passed by the CIT(A) is bad in law. 6. Because the authorities below have failed to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and where ten lac shares allotted by the company were found credited to this account. It was submitted that assessee was allotted one lac shares of ₹ 10/- each which were split into ten shares for one share which made ten lac shares of ₹ 1/- each.The ld. AR then took us to paper book pgs. 9 to 14, where the copy of contract notes issued by the broker M/s India Infoline Ltd. through whom 1,11,700 shares were sold was placed. We were also taken to paper book Pgs. 16 to 27 where the bills issued by the broker M/s India Infoline Ltd. were placed. It was submitted that proceeds of sale of such shares were received by the assessee through banking channel and in this respect our attention was invited to paper book Pgs. 2 to 8 where a copy of bank account of the assessee where the proceeds were credited was placed. In view of above facts and circumstances, it was submitted that assessee had submitted all the documents which were required to prove that assessee did earn long term capital gain on sale of equity shares and on which STT and service tax was duly paid. It was argued that the various Benches of Tribunal in the above noted cases have allowed relief to the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that such scrips were used for providing accommodation entries in the form of long term capital gain. Ld. DR in this respect invited our attention to findings of Assessing Officer and ld. CIT(A) and heavily placed reliance on them. It was submitted that the scrip on which the assessee earned long term capital gain was also mentioned in that investigation report. It was further submitted that the long term capital gain claimed by the assessee was his own unaccounted money which he had converted into tax free capital gain with the help of brokers and inter mediatories. Therefore, the appeals of the assessee should be dismissed. 7. As regards filing of additional evidences, the ld. DR submitted that these evidences on the first hand should not be admitted and if admitted same may be sent back to Assessing Officer for examination of such evidences. 8. We have heard the rival parties and have gone through the material placed on record. We find that there is no dispute between the parties regarding the evidences which the assessee had produced before the authorities below for claiming that assessee indeed was allotted one lac shares @ ₹ 20/- each and which were sold part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Tribunal in ITA 2467/Kol/2017, vide order dated 10.5.2018 has considered a similar issue of the same scrip M/s Sulabh Engineers and Services Ltd. and has allowed relief to the assessee by holding as under: 7. We have heard both the parties and perused the material available on record. We note that the assessee has submitted before us the statement showing purchases and sale of long term capital gain on sale of equity shares (PB-1). The assessee submitted allotment advice for 75,000 shares of M/s Sulabh Engineers and Services Ltd. (PB-2). The assessee submitted the bank detail for payment (vide PB-3 to 5). The assessee submitted before us NSDL statement showing preferential allotment of 75000 shares of M/s Sulabh Engineering and Services Ltd. We note that the assessee also submitted extract of resolution passed and screenshot of money control showing splitting of face value from ₹ 10 to ₹ 1 of M/s Sulabh Engineering and Services Ltd. (PB-11 to 13). The assessee submitted the NSDL state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bh 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, order dated 15.02.2019, wherein the SMC Bench of this Tribunal held that addition has been made by AO mainly on the basis of suspicion and probability . No price rigging established by AO. The ld AO as well as ld CIT(A), were guided by the report of the Investigation Wing, which is general in nature and no specific findings for the assessee, and hence based on these facts the SMC Bench deleted the addition, observing the following. 13. The ld AR 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 Krishnan and 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 evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains 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. 16. It is clear from the above that the facts of the case of the assessee are similar 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 such sale of shares Therefore, respectfully following the same ratio, I am inclined to set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and order to allow the claim of LTCG on sale of share of M/s. SESL and delete the consequential addition. 9. As the issue is squarely covered in favour of the assessee by the decision of the SMC bench of ITAT Kolkata, and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the SMC Bench in the case of Vasudha Jain (supra), we find no reason to interfere in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me AYs, by the Income Tax Appellate Tribunal [hereinafter referred to as the ITAT ]. However, the Impugned Order records the factual position only in respect of ITA No. 1069/DEL/2019. 4. The Revenue urges identical questions of law in all the afore-noted appeals with the only difference being the figures relating to the additions made under Section 68 read with Section 115BBE of the Act. Accordingly, the same are being decided by way of this common order. 5. It is not in dispute, as noted in the Impugned Order, that the factual background in all the three appeals is quite similar. However, for the sake of convenience, the facts in respect of ITA 125/2020 are being noted and discussed elaborately. Briefly stated, the Respondent-Assessee is an individual who has derived income from interest on loan, FDR, NSC and bank interest under the head of income from other sources in respect of A.Y. 2015-16. She filed her return of income, declaring total income of ₹ 13,96,116/-. After claiming deduction of ₹ 1,60,000/- under Chapter VI-A, the total taxable income of Respondent was declared to be ₹ 12,36,120/-. The return was processed under Section 143(1) of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts already recorded by any other authority of the department. Facts narrated above clearly show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry. 24. The report from the Directorate Income Tax Investigation Wing, Kolkata is dated 27.04.2015 whereas the impugned sales transactions took place in the month of March, 2014. The exparte ad interim order of SEBI is dated 29.06.2015 wherein at page 34 under para 50 (a) M/s. Esteem Bio Organic Food Processing Ltd was restrained from accessing the securities market and buying selling and dealing in securities either directly or indirectly in any manner till further directions. A list of 239 persons is also mentioned in SEBI order which are at pages 34 to 42 of the order the names of the appellants do not find any place in the said list. At pages 58 and 59 the names of pre IPO transferee in the scrip of M/s. Esteem Bio Organic Food Processing Ltd is given and in the said list also the names of the appellants do not find any place. At page 63 of the SEBI order-trading by trading in M/s. Esteem Bio Qrganic food Processing Ltd a fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold prescribed under Circular No. 23 dated 6 th September, 2019, the appeals are maintainable in view of the Office Memorandum dated 16th September, 2019 issued by the CBDT, which clarifies that the monetary limits prescribed in the aforementioned circular shall not apply where an assessee is claiming bogus LTCG through penny stocks, and the appeals be heard on merits. 7. Mr. Zoheb Hossain, learned senior standing counsel for the revenue (Appellant herein), contends that the learned ITAT has completely erred in law in deleting the addition, and thus the Impugned Order suffers from perversity. He submits that there are certain germane factual errors, inasmuch as the learned ITAT has wrongly recorded that there was no independent enquiry conducted by the AO, when in fact the AO had issued notices to the companies in question under Section 133(6) of the Act. He points out that the observations recorded in para 25 of the Impugned Order are factually incorrect, and in conflict with para 4 of the order of the CIT(A) dated 24th December, 2018 which reads as follows: 4. Even the broker through whom the shares were dematerialized and sold i.e. SMC Global Securities Ltd. was also a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be sustained. 12. Mr. Hossain s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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