TMI Blog2022 (11) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The number of shares received by the assessee as a result of the amalgamation is not the issue for determination in the present proceedings. AO considering the information noticed that the assessee had sold 750000 shares in M/s. CCL International Ltd. and has not disclosed those in its return dated 02.08.2013. Considering the information after recording reasons and fulfilling the necessary formalities, he issued notice u/s. 148. The assessee filed its return on 26.10.2016 disclosing the sale of transactions. AO recording the reasons for re-opening the assessment in the impugned order dated 27.11.2017 itself required the assessee to explain and justify its claim of Long Term Capital Gain claim made in the revised return in the backdrop of the information of scam in penny stock company. This order is set aside by the ld. PCIT u/s. 263 of the Act. No contrary evidence has been filed by the Revenue. The suspicions and conjectures in the absence of any evidence have no relevance whatsoever. The argument that subsequently the share price rose and the fact that the assessee sold it at a lesser price on an earlier date is a suspicion which cannot be taken as an evidence that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the evidences which were filed before the AO and the ld. PCIT and even further elaborated before us by both the parties, we find on facts that the Revisionary order in the peculiar facts and circumstances proceeds entirely on presumptions, conjectures and surmises. The twin conditions as laid down by plethora of decisions from the case of Malabar Industries [ 2000 (2) TMI 10 - SUPREME COURT] , we find are not met. Accordingly, for the reasons given hereinabove in detail, the impugned order is quashed. Appeal of assessee allowed. - ITA No. 110/CHD/2021 - - - Dated:- 21-9-2022 - SMT. DIVA SINGH , JUDICIAL MEMBER And SHRI VIKRAM SINGH YADAV , ACCOUNTANT MEMBER Assessee by : Shri M. R. Sharma , Advocate Revenue by : Shri Rohit Sharma , CIT - DR ORDER Per Diva Singh The present appeal has been filed by the assessee wherein the correctness of the order dated 21.03.2021 passed by ld. PCIT Panchkula pertaining to 2012-13 assessment year is assailed on the following grounds: 1. That the order passed by PI CIT Chandigarh setting aside the order of assessment passed by the AO under section 143(3) read with section 147 is bad in law and is against the judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. Considering the facts and circumstances, it was his prayer that the delay may be condoned. 3.2. The ld. CIT-DR considering the record and the submissions posed no objection to the prayer for condoning the delay of 1 day. 3.3. We have heard the rival submissions and perused the material available on record. Delay of one day pointed out by the Registry is condoned. It is seen that no advantage has been derived by the assessee by the deposit of appeal fee under the wrong head and no disadvantage is visited upon the Revenue in case the delay of one day in these peculiar facts and circumstances is condoned. Ordered accordingly. 4. Parties were, accordingly, directed to argue the appeal on merits. 5. The Assessing Officer in the facts of the present case made an addition of Rs. 2,15,847/- to the returned income of the assessee vide order dated 21.11.2017 passed u/s. 143(3) r.w. Section 147. The said addition was made by way of disallowing the loss from derivatives and adding it back to the income of the assessee. 6. This order was subjected to the Revisionary Powers of the ld. PCIT u/s. 263 by the order dated 21.03.2021. 6.1. The ld. PCIT addressing the facts consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings u/s. 143(3) of the Act. 8.2. In the said backdrop attention was invited to the Paper Book filed. Inviting attention to the copy of the assessment order dated 27.11.2017 it was submitted that he would want to refer to the assessment order in the Paper Book filed as it also contains a Copy of the Office Note appended by the AO. It was clarified that the copy of the assessment order made available to him did not have the aforesaid Office Note. It was submitted that the assessee had obtained the copy of the assessment order dated 27.11.2017 from the Department under RTI which contains the Office Note. Specific attention was invited to Paper Book page 164 to 168. It was submitted that in the detailed office note passed by the AO, the entire issue as sought to be considered by the ld. PCIT was fully taken into consideration and considered by the AO himself before the passing of the order. A perusal of the same would clearly bring out this fact. It was argued that the present proceedings without upsetting the evidence is an exercise based purely on suspicions alone. Referring to the record, it was submitted that all due enquiries stood made by the AO. The AO not only record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name CCL International during F.Y. 2012-13 i.e. A.Y. 2013-14. The s sold 750000 shares of CCL international Ltd. for an amount of Rs. 9,90,89,257/-. This was a sham transaction in which unaccounted cash was routed back via layers of broker and entry operators. The assessee filed its return of income declaring income of Rs. 24,17,760/- on 02.08.2013. The assessee declared income from house property at Rs. 13,24,753/- and income from other sources at Rs. 12,03,000/-. Then the assessee filed a revised return declaring income of Rs. 1,47,00,760/-. In the revised return income from business has been shown at Rs. 1,22,82,998/-. The transaction regarding sale of share of CIL international Ltd., (Sale amount of Rs. 99089257) has not been disclosed in his ITR and computation for A.Y. 2013-14. The above mentioned facts prove reasonable doubt that this whole transaction carried out by the assessee regarding sale of shares of CGL and earning LTCG thereon was a sham transaction which was meant to launder the unaccounted income earned by the assessee into white money. I have, therefore, reasons to believe that an income of Rs. 9,90,89,257/- and any other income relating to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... randi of taking accommodation enery(sic)(bogus long term capital gain in F.Y. 2012-13) is exactly the same in all the three cases. As the cases of Sh. Kanwaljit Singh toor, and Smt. Harjit Kaur were assessed to tax in DCIT, Centre Circle-27, Delhi. Therefore, copy of the order passed by the DCIT, Central Cirlce-27, Delhi was obtained along with office note to ascertain the taxability of LTCG in the hands of father and mother of the assessee. The office note of the order of the DCTT, Central Circle-27, Delhi is reproduced below:- 1. Since no incriminating documents pertaining to or belonging to the assessee for the current year were found or seized during the course of search, no adverse inference is drawn based on the search material. 2. In this case information has been received from the DDIT(Inv.), Patiala, vide letter dated 22.12.2015 in which it was alleged that the assessee has taken bogus Long Term Capital Gain of Rs. 32,25,000/-. Later on the in the AST Systems also the above information was available under the head of Penny Stock . The information provided by the Investigation Wing and the information available in the ITD Systems have been examined and inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected vide order dated 09.02.2012 of the Hon'ble Delhi High Court hence now no adverse view can be taken by the AO in this regard. It has further been noted that no SLP against the above order of the Delhi High Court has been filed by any person or any agency like SEBI or Income Tax Department, thus, the above order, including the allocation of shares of M/s. CCL International Ltd. to the assessee in lieu of the shares of M/s. AAR Infrastructure Ltd., has attained finality and cannot be disturbed. No evidence of manipulation of the stock of M/s. CCL International Ltd. is available on record. In fact, the stock is currently traded around Rs. 96 per share where the entire stock market is in bearish phase. Keeping in view the current value of share of the above stock and considering the that the average sale price of above shares is Rs. 131 in the year 2012-13 it is apparent that there is no stock manipulation. No information of any inquiry conducted by SEBI regarding the manipulation of stock is available either on the website of SEBI or elsewhere on Internet. In fact M/s. CCL International had declared dividend also during the above period and the assessee has also disclosed rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices Ltd., in the case of assessee Sh. Trivikram Singh which has been received on 06.11.2017 which tallies with the information already filed by the assessee through his counsel. Details of share trading in BSE of M/s. CCL was also downloaded from internet rates as quoted by the assessee has been tallied. Information from the DDIT, (Inv) Mohali, Camp at Aayakar Bhawan, Patiala was also called for which has been received through email giving the name of 27 purchaser of the shares from sh. Trivikram Singh through BSE/NSE. Information of share trading of CCL was also downloaded from internet from 02.01.2012 to 31.03.2013 which placed on records. Sale rate of shares by the assessee on the dates tallies with the figures appearing on internet. Therefore, keeping in view the facts of the case of the assessee it is held that case of the assessee is not of penny stock and held has genuine transaction of share trading. The assessee has made investment of Rs. 30 Lac on 07.03.2011 in purchase of shares of JVtys AAR Infrastructure. The assessee has been allotted Rs. 3 lac shares of M/s. AAR Infrastructure. Subsequently AAR Infrastructure was amalgamated with M/s. CCL International P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per department's Inspector's Report named the five concerns wherein the present assessee was a total stranger. The AO had taken the names of all the buyers of M/s. CCL International Ltd. from the ITD System and none of the buyers of the shares of M/s. CCL International Ltd. sold by the assessee matched with the records of Shri Devesh Upadhyaya. The AO at Delhi, it was submitted, has recorded that M/s. CCL International Ltd. was noticed to be a reputed company whose shares were regularly traded on the BSE for the last so many years and hence, it did not fall in the category of a penny stock company and necessary details in regard to finances for the last few years were taken into consideration and placed on record. It was also noticed that the assessees therein had sold the shares of M/s. CCL International Ltd. at an average price of Rs. 131/- per share during the period of June, 2012 to November, 2012 and the share price afterwards even touched Rs. 500/- per share in January, 2015. Daily movements from Jan., 2012 to Feb., 2016 were placed on record to establish that the movement of the share was as per normal ups and downs of any other stock unlike any stock. 8.8. Ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 143(3) of the I.T. Act on 31.03.2016. 8.9. It was further submitted that in the case of the assessee the AO has specifically called for information u/s. 133(6) from M/s. Master Capital Services Ltd. who was the Broker for the assessee. The information had been received on 06.11.2017. Reading from the page 167 of Paper Book it was further submitted that the AO had noticed in the office note itself that the information so received from the broker of the assessee i.e. M/s. Master Capital Services tallies with the information already filed by the assessee through his counsel. 8.10. Reading from the said page, it was also submitted that the AO downloaded the details of the share trading of M/s. CCL International Ltd. directly from the official BSE Site from internet and found that these tallied with the information made available by the assessee. It was argued that the information from DDIT (Investigation) Mohali was also called forth and compared. Reading from the said office note, specifically page 167 to 168, it was submitted that Information of share trading of CCL was also downloaded from internet from 02.01.2012 to 31.03.2013 which has been placed on records. Sale rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) No extraordinary increase in the profits shown by the Company CCL International Ltd., which would be commensurate with the increase in price of shares of M/s. CCL International Ltd. International Ltd. iii) Further, the most important fact is that; the statement of Sh. Jai Kishan Poddar, Director of M/s. Consortium Capital Pvt. Ltd. which is one of the entities utilized for providing entry of bogus long term capital of M/s. CCL International Ltd., he himself had admitted that he was involved in scam of providing bogus long term capital gain through shares of M/s. CCL International Ltd. and also further admitted that they were also involved in trading of these Jamakharchi Companies through which manipulative transactions in securities to either artificially raise or lower the market of the share are being done. 3. In view of the facts stated above, the assessment framed u/s. 143(3)/147 of the IT Act on 27.11.2017 for A.Y. 2013-14 is erroneous in so far as prejudicial to the interest of the revenue in terms of provisions of section 263(1) of the Income Tax Act, 1961 read with Explanation 2 of the said section. 4. You are, therefore, requested to show cause as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted claims of the assessee is an incorrect assertion of facts. It was vehemently argued that the AO has all along been conscious why it has been re-opened and hence the assessee's case was being looked into from the perspective of being a bogus Long Term Capital Gain in a sham penny stock company. Consequently, he not only verified the rates from the independent sources in the public domain, the AO further verified the facts from the broker of the assessee M/s. Master Capital Services. The Inspector's Report of enquiry from Shri Dinesh Upadhyay was also considered. Thus, the reliance placed upon the case of Shri Anip Rastogi where facts were completely distinguishable was misplaced. The assessee's broker it was re-iterated was not M/s. Consortium Capital Pvt. Ltd. thus the statement relied upon in the case of Shri Anip Rastogi of Shri Jai Kishan Poddar had no relevance. The fact that Shri Poddar was involved in providing bogus Long Term Capital Gain to Mr. Anip Rastogi etc. in the facts of the assessee's case, it was argued had no meaning and relevance. 9.4. With these arguments, attention was invited to the reply of the assessee extracted in the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mated company the same has taken place during the period from 26.06.2012 to 17.11.2012. It is also evident from the perusal of the record that the sale of shares of the amalgamated company which were listed with the National Stock Exchange were sold by the above noted assessee through its brokers known as master capital services limited. The assessee has duly disclosed the long term capital gain arising from the sale of the said shares of the amalgamated company while filing the return of income for the year under consideration. I am also enclosing herewith a copy of the letter dated 24.03.2012 issued by the CCL International Ltd. the perusal of which would reveal and confirm the facts mentioned above. Thus it is clear that the investment for all intents and purposes was made by the assessee for the purchase of shares on 07.03.2011 which were sold after 26.06.2012 which is beyond the period of 12 months and thus the capital gain arising there from has been correctly returned as long term capital gain as per the provisions of section 48 of the Income Tax Act. This fact is further confirmed by the sales statement of the shares issued by the authorized broker of the shares who has dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the shares held in the original company and as such the period of acquisition of the shares do not change and thus remains at 7.03.2011. (iii) A copy of the ledger account with Master Capital Services. A copy of the ledger account in the books of Master Capital Service Ltd. is being enclosed for your perusal and record. The perusal of this would reveal that on 24.03.2012 there was a converted balance of 750000/- shares of CCL against 3,00,000 shares of AAR Infrastructure Ltd. Further perusal of the same would reveal that against the said opening balance on the date of amalgamation i.e. 20.06:2012 the said shares were amalgamated and new shares numbering 7,50,000 of the CCL International Ltd. were shown as opening balance in the books of the Master Capital Services Ltd. Further perusal of the same would reveal that the first sale of 36331 shares took place on 26.06.2012 and the last sale of 43726 shares took places on 09.11.2012. A copy of the sale account maintain by M/s. Master Capital. Services is being enclosed for your perusal and record. 3. That the perusal of the bank account of the above noted assessee as well as the de-mat account and sale account maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the shares held and sold by the above noted assessee during the year under consideration from pages 67-68.1 am also enclosing herewith a copy of the statement of holding as on 31.03.2012 by the above noted assessee. It is also submitted that the perusal of the record would reveal that the assessee was holding shares of other companies also which fact is evident from the perusal of the de-mat account maintained by the above noted assessee. That the assessee during the re-assessment proceedings in response to the query of the Assessing Officer vide letter dated 10.10.2017 submitted as under:- 1. That the perusal of the assessment records of the assessee during the year under consideration would reveal that the assessee during the year under consideration has rental income from the properties as per the details given in the computation chart a copy of which is being enclosed for your perusal record and ready reference. Besides the rental income the assessee during the year under consideration received commission income of Rs. 980000/- after deducting the TDS the details of which are given in the computation chart. The assessee as is evident from the perusal of the compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and record. Since there is no dependent of the assesses as such contents of the rest of the para are not applicable. 11. x x x 15.04.2009 and 17 kanal 10 marla at Ambala purchased on 22.08.2007 copy of the purchase deed enclosed. The assessee is also owner in possession of land 1 kanal and 17 marla in village khanpur Tehsil Saha purchased vide a sale deed dated 3.01.2011. As regards the moveable properties the assessee besides having d-mat account and the balance in the sale account of shares is maintaining bank account with HDFC Bank a copy of which is being enclosed for your perusal and record. 12. That the entries in the D-mat account stands explained as is evident from the perusal of the computation chart for the year under consideration. 13. That the income of Rs. 980000/- the assessee has received as commission from M/s. Kapsons Agencies Pvt. Ltd. Chandigarh. The perusal of the details of the TDS would reveal that TDS amounting to Rs. 98000/- has also been deducted Out of the said payment. As regards the income from other source the income is on account of interest on the various bank deposits as per details given in the computation chart. 14. That a cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm capital gain. The perusal of the bill issued would also reveal that requisite STT and service tax thereon besides there charges have also been levied as applicable to such sales. The payment of the sale price has been made by the Master capital service to the above noted assessee through cheques which fact is evident from the perusal of the statement of account of the master capital services. A copy of the said account is also being enclosed for your perusal and record. (emphasis supplied) 9.6. Reading from page 12 of the impugned order, it was further submitted that the assessee need not further explain in the present proceedings the manner in which after the amalgamation, the shares had been allotted in the D-Mat Account of the assessee. The fact that these were received in the D-Mat account is not disputed by the Revenue. For the record, the details of these shares held by the assessee in the D-Mat account were also provided to ld. PCIT. The fact that his father and mother also stood examined by the AO at Delhi, it was submitted, was again brought to the notice of the PCIT. How the shares in M/s. AAR Infrastructure were acquired by the assessee in the earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares and the genuineness of the transaction. 9.7. It was submitted that the assessee went through the details of the movement in the share price of the said stock on the Stock Exchange during the specific period and tallied it alongwith the D-Mat Account available. It was conceded that assessee many a times has mistakenly used 'NSE' instead of 'BSE' but it is nobody's case that the share was ever available for trade at the NSE. Referring to page 19 of the impugned order, it was submitted that the ld. PCIT thereafter issued another Show Cause Notice to the assessee which merely states that the case was next fixed for hearing on a different date. Reply of the assessee reiterating the same thing as already argued before the AO and the ld. PCIT was again submitted. Position of law in support of the view argued has also been extracted from page 19 to 27 in the impugned order. 9.8. Referring to the impugned order, it was submitted that without caring to address the extracted reply, the ld. PCIT again makes an effort of calling for the record which was already available. Specific ordersheet entry dated 02.02.2021 extracted in para 3.1 at page 28 was referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was his submission that these facts in no way detracts from the claim of the assessee. For ready reference, relevant para 8 at page 39 is extracted hereunder: 8. The company M/s. AAR Infrastructure Limited got amalgamated with another Company namely M/s. CCL International Limited on 09.02.2012. Ms Rama Gupta and Sh. Akash Gupta were also directors of M/s. CCL International Limited. As per the scheme of amalgamation the assessee Sh. Trivikram Singh Toor was allotted 7,50,000 shares of CCL International Limited in lieu of 3,00,000 shares held in AAR Infrastructure Limited, the assessee claims to have sold these shares during the period 26.08.2012 to 09.11.2012 for a sale consideration of Rs. 9,90,89,257/-. 9. It is seen that CCL International was incorporated in May 1996. The company Was formerly known as Gupta Cements. It changed its name to Chirawa Cements. Again in 2008, the name of the company was changed from Chirawa Cements to CCL International. 9.10. Carrying the Bench through the replies on record of the AO and the ld. PCIT, it was submitted that the ld. PCIT notices the fact that the amalgamation was approved by Hon'ble High Court on 09.02.2012 at page 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the ITAT and the High Court relied upon before the AO on 13.10.2017 were again relied upon before ld. PCIT. Referring to the record, it was submitted that the AO on 17.11.2017 issued summons to the assessee to be present personally before the AO on 21.11.2017. Letter to DDIT Mohali camp at Patiala referred to in respect of 27 parties who had purchased shares of M/s. CCL International Ltd., were e-mailed and information was sought. 10.1. Referring to the record, it was submitted that on 22.11.2017, the assessee was present before the AO. His statement was recorded. Accordingly, it was his submission that the order has been passed after due enquiries wherein the AO as per the reasons recorded extracted in the order was always conscious that it was alleged as per record to be a sham transaction and the Long Term Capital Gain claim was bogus. He was aware of the statement made by some persons before the Directorate Investigation that Long Term Capital Gain claimed by various beneficiaries in the penny stock company was bogus. However, once he looked into the specific record of the assessee and looked at the transactions of the assessee which were at arms length, the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capital Gain claim of Rs. 9,55,27,113/- and to furnish details of companies from which LTCG earned. 10.4. Specific attention was invited to page 17 query 19, to justify increase in fixed assets in both the returns filed with documentary evidence. 10.5. Accordingly, it was his submission that the AO was always conscious as to what he was required to do in the 148 proceedings. Inviting attention to the reply filed by the assessee on 24.08.2017 which continues from page 18 to 21 it was specifically highlighted that all these details were made available including copies of the Sale Account, D-Mat Account as well as Computation Chart, Copies bank accounts of the assessee in support of the assessee's stand were also made available. The entries in the D-Mat account read alongwith the computation chart were all relied upon. The background of how the assessee purchased the shares set out in para 17 supported with documents as argued before the AO at Paper Book page 20 was also specifically highlighted: 17. That with regard to the said long term capital gain are given in the computation chart. The above noted assessee was allotted 300000 shares by M/s. AAR Infrastructure Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r your perusal and record. 10.6. Attention was also invited to the reply dated 20.09.2017 made to the AO by the assessee's counsel at Paper Book page 22 to 26. It was heavily relied upon in the present proceedings by the ld. AR. Again para 2 and 3 of the said reply further clarifying para 17 in the earlier reply, it was submitted, would address these issues. For ready reference, page 22 para 2 heavily relied upon from the impugned order is reproduced hereunder: 2. That the perusal of the record would reveal that the company named and styled as M/s. AAR Infrastructure was amalgamated with M/s. CCL International Pvt. Ltd. vide an order dated 09.02.2012 of the Hon'ble Delhi High Court. A copy of the said order passed by the High Court is being enclosed for your perusal and record. The perusal of the said order would reveal that as a result of amalgamation the above noted assessee became entitle to 7,50,000 shares of the said amalgamated company. It is further verifiable from the said order that the face value of each share of the amalgamated company was fixed at Rs. 2/- per share. Thus it is evident from the documents referred to above that the above noted assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on chart. The perusal of this would further reveal that sale bills for the sale of shares have duly been issued and STT has been charged in the said bills. It is also evident from the perusal of the said account that the shares which has been sold were sold at rates which were there on the BSE. I am also enclosing herewith following documents for your perusal/record and verification:- (i) Copy of allotment letter dated 07.03.2011 issued by AAR Infrastructure Ltd. showing the total number of shares at 3,00,000 and having total value at Rs. 30,00,000/-. The certificate also shows that the Client ID No. 10910718 is held by the above noted assessee. The perusal of this would also reveal that the allotment of the shares has been made on the basis of approval accorded by the board of directors in its meeting held on 01.03.2011. The particulars with regard to the payment made by the assessee and the receipt thereof by the company duly stamped are also mentioned in the said letter of allotment. (ii) Copy of the order of amalgamation passed by the Hon'ble Delhi High Court dated 09.02.2012. The perusal of this order would reveal that the proceeding for the amalgamation were sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the year under consideration it is submitted that no purchases or sales of shares were undertaken by the above noted assessee. 10.7. Accordingly, relying upon the definitions and the relevant provisions to address how manipulation has been defined u/s. 2(1)(b) in para 4 and Section 47(vii) as how transfer is defined and Section 49 sub-clause (ii) which refers to certain modes of acquisition, it has been argued; Thus as per these provisions as mentioned above the above noted assessee has received 7,50,000 shares of the CCL International Ltd. in lieu of 3,00,000 shares of AAR Infrastructures Ltd. which company was amalgamated. Thus in view of the provision as contained u/s. 47(vii) the cost of 1,50,000 shares of CCL International Ltd. would be Rs. 30,00,000/- which was the original cost paid by the assessee towards the purchase of 3,00,000 shares of AAR Infrastructure Ltd. As regards the Long Term Capital Gain the same is to be regulated by the provision of section 10(38) of the Income Tax Act. Since as per the said provision for the purpose of availing the benefit of the said section the period of holding of the shares has to be 12 months. Since the shares have been purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the cost of each share would work out to be Rs. 21- per share. I am also enclosing herewith copy of saving bank account No. 0056193100197723 maintained by the above noted assessee with the HDFC Bank during the financial year relevant to the assessment year 2011-12, 2012-13 and 2013-14. I am also enclosing herewith a copy of the transaction statement issued by the Master Capital Services Ltd. in respect of the shares held and sold by the above noted assessee during the year under consideration from pages 67-68.1 am also enclosing herewith a copy of the statement of holding as on 31.03.2012 by the above noted assessee. It is also submitted that the perusal of the record would reveal that the assessee was holding shares of other companies also which fact is evident from the perusal of the de-mat account maintained by the above noted assessee. 11. It was submitted that before the AO, the assessee had relied upon the decision of the Mumbai Bench of the ITAT in the case of Mukesh R. Marolia V ACIT (2006) 6 SOT 247 (Mum). Copy of the said decision as made available to the AO and relied upon in the present proceedings at page 27 to 34 was relied upon. He further drew attention to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrah Marker Vs ITO is has been held that long term capital gain on sale of penny stocks cannot be treated as bogus and unexplained cash credit if the documentation is in order and there is no allegation of manipulation by the SEBI or the BSE. Further it has been held that when the shares are purchased through the banking channels from the stock broker registered with SEBI M/s. Khambatta Securities Ltd. which fact have been confirmed by the said stock broker in our considered view the assessee has discharged the onus required under section 68 of the Act as she has established the identity of the payer source of funds received on sale of the same shares and the genuineness of the transaction. 2 That the Hon'ble Calcutta High Court in the case of CIT Vs Korley Trading Co Ltd. has held vide para 4 of the order that in case the has discharged his duties with regard to the purchase, sale and payments made and payments received towards the sale of the shares including the date of sale and date of purchase and no of shares contained in each transaction and the value of the shares and mode of payment thereof then no disallowance can be made for the claim of the assessee. A copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills and copy of the bank account in which the sale proceeds of shares has been transferred was also relied upon. It was highlighted that there is no cash transaction either at the time of purchase or at the time of sale of shares. All transactions took place at the Stock Exchange. The sale of shares, it has been argued in the aforesaid letter dated 16.10.2017, specific page 46 para 9, it was highlighted that the sale of shares has taken place during the times and on different dates as per prevailing rates at the Stock Exchange. In this context, reliance was placed on the decision of Hon'ble Bombay High Court in the case of CIT Vs Mukesh Rati Lal Marolia in appeal No. 456/2007 decided on 07.09.2011. Order of the ITAT Mumbai Bench in the case of Farrah Marker Vs ITO was also relied upon wherein the documentation supporting the transaction is available and there is no allegation of manipulation by the SEBI or the BSE. The decision of the Hon'ble Calcutta High Court in the case of CIT Vs Korlay Trading Co. Ltd. 232 ITR 820 (Cal) was also highlighted and the assessee's case, it was canvassed, is duly covered by the said decision. Reliance was further placed as per para 12 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of M/s. Chirawa Cements. Since it is the time barring matter, it is requested that information/ledger should be produced by duly authorized person in the office of undersigned on 24.10.2017 at 12.30 PM.. This may also be noted that the information is being called for u/s. 133(6) of Income Tax Act, 3.961, failure to furnish information in time can result in imposition of penalty Rs. 100/- for each day of default. Yours Faithfully, Sd/- (Y.K. SAINI) Income Tax Officer Ward-6(1), Mohali. 11.3. From pages 66 to 78, it was submitted, that the details of the assessee made available by the assessee's Broker is appended in the Paper Book. Attention was invited to page 79 which is copy of the letter of the AO issued to DCIT (Inv) Mohali with enclosures upto page 83 including the reply from the said authority, a perusal of which shows that in none of the 27 companies mentioned therein, the assessee's name is appearing either as a Director or a company wherein the assessee is interested as mentioned. 11.4. Accordingly, it was his submission that the AO passed the order with due care and attention. The enquiries, it was submitted, continue till page 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that it was held that the reasons for rejecting the assessee's claim therein were as under: ...........I further note that Investigation Wing had recorded the statement of Sh. Jai Kishan Poddar who is one of the Director of M/s. Consortium Capital Pvt. Ltd. which is one of the entities utilised for providing entry of bogus long term capital gain of M/s. CCL International Ltd. who had admitted that he was involved in scam of providing bogus long term capital gains through shares of M/s. CCL International Ltd. had also admitted that they were also involved in trading of these Jamakharchi Companies through which manipulative transactions in securities to either artificially raise or lower the market rate of the shares are being done...... 11.6. In the said background considering the decision of the Apex Court in the case of McDowells Company 154 ITR 148 Sumati Dayal 214 ITR 801, the assessee's case was dismissed. These decisions, it was submitted, have no role or relevance in the facts of the present case. 11.7. Addressing the order of the ITAT in ITA 3809/Del/2018 dated 08.01.2019 in detail, it was further argued that the case of Anip Rastogi Vs ITO which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old through the Broker India Nivesh Securities Pvt. Ltd., considering the order, deleted the addition. Relevant extract in para 5 from the case of Reeshu Goel, para 16 to 18 were heavily relied upon. Accordingly, heavy reliance was placed upon the said decision. For ready reference, these paras are reproduced hereunder: 16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as material referred to before us. As stated above, the assessee has applied for 50,000 shares of M/s. AAR Infrastructure Ltd. for face value of Rs. 10 and paid consideration of Rs. 5 lacs vide cheque no. 169799 dated 13.01.2011. The said purchase has been recorded in the accounts of the earlier year and is also reflected from the copy of bank statement place at paper book at pages 25. The purchases made in the earlier years have been accepted as only net LTCG has been taxed by the Assessing Officer. The assessee was allotted shares of M/s. AAR Infrastructure Ltd. and immediately thereafter, the assessee had dematerialised the shares on 26.02.2011 which is evident from the copy of Demat account enclosed at pages 27 to 28 of the paper book. Later, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (Page 27) d) Copy of statement of broker reflecting the credit of 50000 equity share through preferential allotment. (Page 28) e) Copy of order of Delhi High Court, dated 08.10.2011 in the matter of amalgamation of M/s. AAR Infrastructure Limited into M/s. CCL International Limited. (Page 29-44) f) Copy of Contacts notes reflecting the sale proceeds. (Page 45-50) g) Copy of Transaction statement reflecting the increase in the number of shares. (Page 51) h) Copy of Bank Statement of the appellant reflecting the amount received on sale of shares. (Page 54). f) 18. The entire premise of the Assessing Officer for treating the entire transaction to be a bogus Long Term Capital Gain and making addition u/s. 68 is that, firstly, M/s. CCL International Ltd. did not have much financial worth to justify such a price rise; secondly, the SEBI had suspended the trade of the share for a brief period; thirdly, he has pointed out the history of price rise between 06.02.2010 to 25.11.2014 and then has drawn adverse inference that price of these shares were manipulated and rigged in the stock exchange which was solely to provide accommodation entries to the various parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquired upon. Simply relying upon the general modus operandi and statement of some brokers recorded by the Kolkata Investigation Wing does not mean that all the transactions undertaken of the scrip M/s. CO International Ltd. through the country by millions of subscribers are bogus. Thus, in absence of an material or evidence against the assessee, we do not find any reason as to why the claim of Lon Term Capital Gain from sale of such share should be denied. I.T.A. No. 503/Lkw/2019 Assessment Year. 2015-16 Consequently, the addition on account of commission is also deleted. Accordingly, we delete the addition made by the Assessing Officer. 6.2 The above findings of the Tribunal clearly demonstrate that the Tribunal has held the scrip of CCL International Ltd. to be a genuine scrip and has therefore, allowed the appeal of the assessee. 11.8. Attention was also invited to the decision mentioned at Sr. No. 2 in the Case Law Paper Book (pages 9-20) in the case of Mukta Gupta Vs ITO (ITA No. 2766/Del/2018) wherein considering near identical facts as would be evidenced from para 2 of the aforesaid decision which would show that in 2014-15 assessment year also, the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiary of any accommodation entry under any inquiry or investigation. Once all these transactions are duly proved by trading from stock exchange, then to hold the sale of shares as unexplained credit or as unexplained money cannot be upheld. Accordingly, we hold that the money credited in the account of the assessee is from the sale of shares and accordingly benefit of Long Term Capital Gain on sale of such listed equity shares have to be given. 11.9. Similar facts, it was submitted, was noticed in the case of Mukta Gupta by the ITAT in the order dated 26.11.2018. 11.10. Attention was also invited to the order of the ITAT dated 07.06.2019 in ITA 2381/Kol/2018 pertaining to 2015-16 assessment year in the case of Mool Chand Jagwayam Vs ITO. Inviting attention to page 22 of the Paper Book para 3 of the said order, it was highlighted that in the facts of the said case, the assessee having purchased scrip of M/s. CCL International Ltd. sold it in 2015-16 assessment year which came to be questioned by the AO. The scrip was sold through M/s. Vardhman Capital Pvt. Ltd. The sale and purchase was through D-Mat account. Copies of Contract Notice were made available. The AO denied rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Referring to it, the ld. AR submitted that there was corporate action on the said share on 17.08.2011 wherein the old face value of the scrip was 10 and the new face value was 2. Again on 04.12.2015 the old face value of the said scrip was 2 and the new face value was 10. This information, it was submitted, is as per the moneycontrol.com. Inviting attention to Paper Book page 54, it was submitted that the price of the said scrip on 05.01.2015 would show the value as 140.07 whereas on 03.12.2015 it was 27.06. Accordingly, this difference, it was submitted, can be explained from the change in face value of the share. 12. Inviting attention to Paper Book pages 55 to 59 it was submitted that in the facts of the present case, the AO has recorded the statement of the assessee. The invoices supporting the claims, the Brokers' account, the D-Mat account maintained of the assessee, the bank statements etc. all have been seen. None of these are shown to be incorrect. Accordingly, it was his submission that on facts the assessee's case cannot be said to be incorrectly considered by the AO. The order has been passed after due consideration of the facts available on record and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Referring to the reliance placed by the assessee before the AO, it was specifically highlighted that repeatedly the assessee has used and explained its arguments to be in a genuine company by referring to the evidences of the NSE. It was his vehement argument that at no point of time these shares have ever been treated at the National Stock Exchange and it is exclusively available at the Bombay Stock Exchange, hence frequent reference to NSE instead of BSE would show that the assessee in a very casual manner has proceeded to rely upon evidences to argue that these were valid evidences to claim that the transactions were genuine. The AO, it was submitted, without caring to even notice which Stock Exchange was being referred to, allowed the claim casually. 13.2. Inviting attention to the Show Cause Notice issued to the assessee and the reply of the assessee, it was submitted that the impugned order was fully justified on facts. Inviting specific attention to page 31 of the impugned order, it was submitted that the ld. PCIT has taken note of the fact that as per the details, the assessee has mentioned Chirava Cements and it has been noticed by the ld. PCIT that the Chirava Cement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanges of M/s. CCL International Ltd. before amalgamation and again after the amalgamation noticing the fact that the amalgamation was under the supervision of the Hon'ble High Court, the ld. PCIT has noticed the sudden jump in the share in the range of Rs. 30 to Rs. 40/-. It was submitted that the rise was questioned by the ld. PCIT and she has categorically observed that there was no justification for the steep rise in the share price except for the fact that it was rigged. Considering the modus operandi in penny stock which had been judicially noticed, ld. PCIT has held at page 49 that the AO not did not call for relevant documents nor examined the documents filed, nor considered the legal provisions, thus on account of failure to make proper enquiries/verification and considering the judicial position thereon, the assessment order was set aside holding as under: 22. In the facts and circumstances of the case, the failure of the Assessing Officer make enquiries/verification to arrive at the correct and complete facts and to apply the correct law makes the assessment order erroneous in so far as prejudicial-to the interest of revenue. Hence, the said assessment order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments were available despite that considering the scams the appeals of the Revenue were allowed affirming the orders of the AO and the Hon'ble Court held that the Tribunal committed a serious error in setting aside the order of the CIT in interfering with the assumption of jurisdiction by Commissioner u/s. 263. In the said order, it was submitted that the shares of M/s. CCL International Ltd. at page 58 had also been referred to. 13.7. Accordingly, it was his prayer that the assessee's appeal may be dismissed. 14. The ld. AR submitted that though he can make preliminary submissions on this decision, however, it being a lengthy order some time to address the said decision, it was requested may be given. 15. On the next date, ld. AR submitted that in the facts of the said case at internal page 11, it would be seen that the issue for consideration before the Hon'ble Court was manipulation of share price of Surabhi Chemicals and not M/s. CCL International Ltd. 16. The ld. CIT-DR on the other hand submitted that in the lead case, facts referred may have been of Surabhi Chemicals, however, in the said decision, the shares of various other companies which were fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price movements in the penny stock companies set aside the order of the ITAT. The said decision, it was his submission, fully applies to the facts of the present case. 18.1. The ld. CIT-DR further relying upon the extract from the Business Standard submitted that during the period June, 2012, specific share was trading in the range of 537 and on 18.09.2012, it was trading at Rs. 720/- to Rs. 724/-. Accordingly, the fact that the assessee as per his own submissions has sold it at a lesser price, again becomes an issue for questioning. Accordingly, it was his submission that on facts the impugned order may be upheld. 19. The ld. AR submitted that the decision in the group cases in Swati Bajaj rendered by the Hon'ble Calcutta High Court is inapplicable to the facts of the present case. The order operates on facts peculiar to its own as the sale/purchase was not from the D-Mat accounts. Some of these were off the Stock Exchange private placements. The observations and findings qua the company therein has no applicability to assessee's case. The company in the present case continues to operate on the Stock Exchange. The trades were made on the Stock Exchange. The supporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and fulfilling the necessary formalities, he issued notice u/s. 148. The assessee filed its return on 26.10.2016 disclosing the sale of transactions. The AO recording the reasons for re-opening the assessment in the impugned order dated 27.11.2017 itself at pages 1 and 2 required the assessee to explain and justify its claim of Long Term Capital Gain claim made in the revised return in the backdrop of the information of scam in penny stock company. This order is set aside by the ld. PCIT u/s. 263 of the Act. 20.4. A perusal of page 11 and 12 of the impugned order shows that the assessee had fully explained that these shares were allotted in the D-Mat Account L 1083 maintained with the Broker. The purchase of shares in M/s. AAR Infrastructure vide cheque; its amalgamation with M/s. CCL International Ltd. and the allotment of shares after the order of the Hon'ble Delhi High Court are consistent facts repeatedly argued before the ld. PCIT. The various queries by the AO and the replies of the assessee are all a matter of record. We find that despite these repeated submissions extracted in the order various facile objections/observations are made by the ld. PCIT. As an illus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive. 01.04.2011 by the order dated 09.02.2011 of Hon'ble Delhi High Court. 3. On 01.04.2011 i.e. before the amalgamation the share of M/s. CCL International was being traded between Rs. 8 and Rs. 9 which was as per the financial position of the company: 4. Suddenly after amalgamation the share price starts rising and reaches peak and then starts declining. The assessee claims to have sold the share in this period. 20.5. In the facts of the present case, the allotment of shares in M/s. CCL International Ltd. as a result of amalgamation of M/s. CCL International Ltd. with M/s. AAR Infrastructure as noticed earlier, is not the issue for consideration. This issue, as noticed earlier, had already attained finality as it has not been challenged further. The occasion to make the above assertions is only a vain attempt to arouse suspicion. The Revenue has not placed any evidence or argument to show that this issue was influx or that the order of the Hon'ble Delhi High Court was under challenge in any proceedings before any Court. We have seen the queries raised by the AO; responded to by the assessee; the information sought by the AO from the Broker of the assessee; i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n placed on record before us to show that the said penny stock company is a sham company. The entire case of the Revenue appears to be on the foundation the of SMC order in the case of Anip Rastogi. As a result of this order dated 08.01.2019 the Revenue got a second wind. This order admittedly was not available to the Assessing Officer while passing the order. Not-withstanding the arguments that the said order was distinguishable on facts as the Broker therein was apparently in concert or connected with M/s. Consortium Capital Pvt. Ltd. whose Director Shri Jai Kishan Poddar had given a statement that he had indulged in bogus transactions in M/s. CCL International Ltd. the fact remains that this order's finality itself was influx as it was challenged by that assessee itself before the ITAT Delhi Benches u/s. 254(2) of the Act for the presumed mistakes therein. The fact remains that ultimately the issue was settled under 'Vivad Se Vishwas Scheme' as a result thereof, the Miscellaneous Application filed by Shri Anip Rastogi therein was withdrawn. Thus, we find that the order relied upon by the Revenue admittedly cannot be said to be a final order laying down any precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be over-emphasized that not only the decision should be read fully but all relevant acts considered therein are required to be culled out. Even a single additional or different fact, may make a world of difference between conclusions drawn in two cases which otherwise apparently may appear to be two near similar cases. Reference may be made to Padmasundra Rao v State of TN 255 ITR 147 (SC). Thus, judicial sanction cannot be given to application of a decision wherein the Authority without even caring to discuss how the factual situation therein fits in with the factual situation of the decision on which reliance is placed. The said exercise repeatedly has been held to be a meaningless exercise. Hence, at the cost of repetition, it cannot be overemphasized that the Courts only decide the question before it or what is agitated before it and what was not argued or not considered, cannot be presumed to be considered therein. As opposed to the decision of Anip Rastogi, we find that there are many orders of Co-ordinate Benches qua M/s. CCL International Ltd. relied upon by the ld. AR which have not been rebutted by the Department. The fact remains that the assessee has successfully pleade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. With hindsight most everyday rationale decisions may ultimately appear to be ill-advised actions, however none of us are clairvoyants and hence being incapable of seeing the future we act in the present. Decisions taken in the present are based on available input. What lies in the future is always an estimated guess. 20.7. The Revenue has also questioned the current financial health of the company so as to declare it a bogus sham penny stock company. The said insinuation is mischievous. There can be many reasons for the rise and fall in the fortunes of companies existing in dynamic ever changing business economic environments. Thus, even if the financial health of M/s. CCL International Ltd. at the present time may not be very promising, however, this fact by itself cannot lead to the conclusion that its existence and functioning was a sham. The presumption that in future, the company is incapable of doing well has no rationale basis. The historical rise and fall of businesses is replete with stories of penny stock companies sometimes rising upto becoming the multi baggers. Investment in Penny Stock companies is risk ridden and the investment depends on the risk appetite or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Ltd. was not involved. Moreover, the share was noticed to be thinly traded and some transactions therein were off the marked transactions. In the facts of the present case, there is no aspersion cast by SEBI on the functioning of M/s. CCL International Ltd. Thus, the subsequent rise in its price is not relevant as it in no way establishes that the shares sold on the Stock Exchange on the specific dates was a bogus transaction. It goes without saying that with the benefit of a hind sight everyone can so arrange their affairs including financial affairs to ensure that the best and most suitable outcome desired is achieved. However, actions are always made in the present and it is impossible to have a clear picture of what consequences the actions made in the present will result in the future. The assessee having sold the shares on the dates in ignorance of the future possible rise in the share price of the said share which we now see at best can illustrate that ideally the assessee should have waited and by no stretch of imagination can be construed to be a case leading to the conclusion that the transaction was manipulated or bogus. No one is capable of predicting the future Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e environment so enabled is not only for the benefit of the blue blooded pedigreed companies but also exists for rank and mature/beginners. These first time businessmen/women also have the right to participate in the economic activity of the country for Build India initiative. They may not be in a position to have access to huge capital but cannot be thrown out of the playing field causing loss to the economy by depriving itself of the fresh business acumen/intellect discounted solely on the count that they start their business ventures as penny stock companies. Their animal spirit to provide new blood to the economy cannot be dismissed by one stroke. The economy ensures a level playing field for all players whether penny stock, mid cap or large cap. No doubt the ventures are high risk. It is also fair to be cautioned by the fact that dubious players may also enter the field. We are aware of the manipulating strategies of 'Pump and Dump which are circulated by wily players where a dubious share is amped up in the business circles of print and media so that an incorrect sentiment of future rise in it is played out. Once the prices rise on account of trusting naive Investors, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that the price of the specific stock was substantially different vis- -vis the claim of the assessee. On the other hand the ld. AR has, as per extracts made from the Money Control site has shown that the sale on the specific dates was as per the price available on the BSE. The ld. CIT-DR has relied upon the extract from the Business Standard site stated to be most reliable and the ld. AR has tried to support his claim through Money Control and ultimately through the Bombay Stock Exchange official site. The ld. AR has also submitted that the difference in the share price vis- -vis the Revenue's record is possibly on account of the fact that there was corporate action on the specific date highlighted and thus, this difference which has occurred on account of corporate action where value of 10 shares was consolidated in two share as a result of which there has been a price variation. This fact, it has been submitted, has been noted judicially. We find that the suspicions so aroused have no basis. The non factoring of the Corporate Action to which the specific share has been subjected to is not rebutted by the Revenue. The fact remains that the shares have been sold on the Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson and why the words of such a manipulative person be permitted to be given a precedence over the documents and evidences relied upon by a person relying in good faith on the bonafide of his Broker needs to be seriously introspected upon and addressed by the tax authorities. Permitting such criminal acts by carelessly accepting the statements/surrenders made by unscrupulous brokers needs to be addressed consciously especially when applied to the clients of such brokers who may have trusted the financial acumen of these brokers. These innocent trusting lambs should not be carelessly allowed to be thrown at the wolves by the manipulative brokers. These surrender statements should be viewed with due care and caution. It is necessary for the tax authorities to examine whether the traded company has actually been barred from the Stock Exchange or was still continuing on the Stock Exchange. For the sake of removing doubts, it is being clarified that the observations are made to the transaction of buy/sale through the D-Mat account on the Stock Exchange in listed companies. 22. Accordingly, on a careful consideration of the entire facts, circumstances and position of law as discusse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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