TMI Blog2021 (12) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 - DELHI HIGH COURT ] we hold that in absence of any specific finding against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated as far as long term capital gain earned on sale of share of M/s AGIL is concern. Capital gain earned by the assessee cannot held bogus merely on the basis of some report finding unearthed in case of third party/parties unless cogent material brought against particular assessee are brought on record. Therefore, we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of assessee appeal is allowed. - ITA No. 904/AHD/2018 - - - Dated:- 10-11-2021 - Shri Mahavir Prasad, Accountant Member And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri Mukund Bakshi, A.R For the Revenue : Shri S.S. Shukla, Sr.D.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Vadodara, dated 16/02/2018 arising in the matter of assessment order passed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Thereafter, one share of M/s AGIL got splitted into 2 shares dated 15th June 2012 at face value of ₹ 5 per share. However, the price of shares of M/s AGIL increased (₹ 39.7/-) unprecedentedly in a short period which was not supported by the financial performance or any extra ordinary event. Further, in the investigation carried out by the Directorate of Investigation wing of Kolkata Income Tax, it was revealed that the shares of M/s AGIL were manipulated by the broker such as M/s Anand Rathi Shares Stock Brokers Limited for providing accommodation entry by way of bogus capital gain. Therefore, the AO vide SCN dated 20th December 2016 purposed to treat the capital gain declared by the assessee as bogus and unexplained money under section 68 of the Act. 4.2 The assessee in in response to such show cause notice made a detailed reply vide letter dated 27th December 2016 and furnished in support of his claim being long-term capital gain the following documents: a. Source of investment made. b. Contract note for purchase and sale of shares. c. Bank statement reflecting payment and receipt of sale of shares. d. DEMAT statement to prove delivery of shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the average price was of ₹ 39.70 per share between 10th December 2013 to 20th December 2013 which has gone as high as ₹ 56 per share during the period of 3 to 4 years in 2010 to 2014. 4.7 The statement of sale/purchase of the shares of the company i.e. M/s AGIL was having average turnover of ₹ 30 to 40 lacs approximately per month and its peak reached to ₹ 7,97,13,380/- per month on BSE. Thus the observation of the AO that there was negligible trade and there being no buyer at all in the market was wrong. The assessee in support of his contention has also attached the extract obtained from the BSE reflecting the sale/ purchase of the shares of the company. 4.8 The assessee has sold part of the shares i.e. 7,60,003 against his holding of 10 lakh shares. Had the assessee been using the shares of M/s AGIL in order to generate the bogus long-term capital gain, then he would have sold his entire shareholdings. 4.9 However, the AO was not satisfied with the submission of the assessee in the light of certain facts observed during the assessment proceedings which are detailed as under: a. In addition to the statement of Shri Sanjay Vora of M/s Anand Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated deals including cross deals banned. h. The assessee was not the regular investor in the shares of the companies. Accordingly, a single transaction generating huge exempted long-term capital gain evidences that it was a manipulated transaction for converting his unaccounted money in accounting form. 4.10 Based on the above, the AO treated the sale proceeds shown by the assessee for ₹ 2,54,86,714/- against the sale of shares as cash credit under section 68 of the Act by observing as under: 21. In view of the facts and circumstances discussed supra and circumstantial evidence available on record, it has been concluded that the transactions were sham transactions and aimed only to bring unaccounted money in the guise of exempted long term capital gains and paper work has been got up and done merely to give a color of authenticity to the transaction and by creating a fa ade of legitimate transactions. 22. On perusal of the above submission made by the assessee, it is seen that the assessee squarely failed to substantiate genuineness of his claim of exempt Long Term Capital Gain of ₹ 2,54,86,714/-. Hence in view of the discussion above from para 3 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the LTCG earned by him, especially in the circumstances where no evidence was brought by the Revenue on record suggesting that he was involved in any wrong doing. Further, the AO s finding that the scripts of M/s AGIL were not traded is factually incorrect as there were huge transaction. In view of the above the assessee prayed before the ld. CIT (A) to allow his claim of exempt long term capital gain u/s 10(38) of the Act. However the learned CIT (A) disregarded the contentions and confirmed the order of the AO by observing as under: 6.12 As has been mentioned supra, during the relevant year, the assessee earned income from sale of shares of M/s.Alpha Graphic India Ltd.(AGIL). The assessee claimed said amount as exempt section 10(38). It is evident from various details along with meticulous analysis that share transactions were not genuine. It was noted that the purchase of shares was off market purchase not reported in the stock exchange. Moreover, the purchase was through a back date contract note in cash and, there was no trial. It was also noted that the shares belonged to a penny stock company, with no credentials, and selling rates were artificially hiked, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pha Graphic India Ltd., a letter calling of information u/s.133(6) was issued on 29.12.2017 to the auditor of the said company (as available on the web site of the company) to furnish certain details / documents regarding capital introduced by directors / partners / members of the company along with detailed analysis of the company's financial strength and how the value of shares (earning per share) has been fixed. Also, further to provide the name and address of the operator / agents and other important persons the persons involved in fixing the share price. In response to the said notice the Auditor of the Company Shri O.P.Rathi, C.A has categorically refused that they have not audited the books of accounts of Alfa Graphics India Ltd and also not aware of the business of the company. Further, letter to M/s. O.P.Rathi Co. has written on 15.01.2018 to further clarify that from the copy of Annual Report for the year 2011-12, 2012-13 ,2013-14 2014-15 , it was seen that certified Balance Sheet, P L Account and Cash flow statement signed by Shri O.P.Rathi, C.A. Since, the auditor vehemently objected / denied that the books of accounts of the company have not been audited. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said payment would make a non-genuine transaction, genuine. (i) the scrip is a penny stock, purchased at a low price, which is over a period of time ramped up by operators acting in benami names or name lenders. The purchases are off market purchases, and not reported on the exchange; (ii) the purchase/s is back dated, i.e., per a back dated contract note, paid for in cash, so that there is no trail (iii) the purchases are in the physical form, and dematerialized only subsequently; generally long after the purchase date, being back dated and, further, close to the date of sale; and (iv) the investee is a penny stock company, with no credentials, and the sale rates artificially hiked, with no real buyers, so that the inference of the sales being bogus, is unmistakable. 6.15 The Assessing Officer, accordingly, treated the impugned transaction as not satisfactorily explained, and added the same u/s.68 of the Act. Reliance was placed in the case of Som Nath Maini (supra), also reproducing there-from, as well as in the case of Dy. CIT v. Housing Development Finance Corpn. Ltd. [2006] 98 ITD 319 (Mum.), rendered applying the first principles and the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in detail and the same cannot take the place of the evidence. But in the case on hand there was no enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s AGIL by the assessee or his broker. Similarly, there was no complaint filed by any of the party either to the SEBI or the stock exchange about the assessee or brokers impleading that they were involved in the activity of rigging up the price of the shares. Similarly, the AO has not conducted an enquiry from the SEBI or BSE about the assessee whether he was engaged in the frivolous activities as alleged. 7.2 We also note that the AO has referred to the investigation carried out by the investigation wing of Kolkata wherein it was unearthed that the certain broker or entry provider have accepted that they have used the script of the M/s AGIL to provide bogus exempted long term capital gain to certain class of beneficiaries in consideration of cash. However, there was no information available on record whether the name of the assessee was appearing in the investigation carried out by the investigation wing of Kolkata or any other investigation carried out by the Income Tax Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alleged rigging up the prices of the shares. He has no nexus or any relation with the company, its directors or entry operators who accepted to the modus operandi. (vi) The assessee may have got only incidental benefit of price rise. (vii) The assessee invested in penny stocks which gave rise to huge capital gains in a short period, does not mean that the transaction is bogus as all the documents and evidences have been produced. (viii) The opportunity of cross examination has not been extended to the assessee despite having the request from the assessee. 7.7 It is also important to note that the assessee was holding 10 lakh shares M/s AGIL. However, the assessee has sold only part of the holding i.e. 7,60,003 shares. The remaining shares are still with the assessee as investment. Had the assessee been involved in manipulating the prices or purchased with intention to book bogus exempted income, then he would have sold the entire shareholding. Thus the conduct of the assessee suggests that he was not involved in rigging or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far there was SEBI enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata, 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, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO bearing ITA No. 549/Ahd/2008 involving identical facts and circumstances has held as under: 7. We have gone through the relevant record and impugned order and heard both the parties. Assessee submitted that he is a customer of ICICI Bank and having demat account of ICICI Securities Ltd. and he has purchased shares through ICICI Securities Ltd. and money has been paid through banking channel. Copies of bank statement and Demat account have been submitted before the lower authorities. 8. Ld. A.R. also drawn our attention towards the statement of Edelweiss Broking Ltd. through the said company shares were sold and also shown us copy of the Contract Note and all these details were furnished before the lower authorities. The assessee has earned long term capital gain from the sale of companies share i.e. Alpha Graphic India Ltd. and Blazon Marbles. 9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10.Ld. A.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
