TMI Blog2022 (11) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... rely on the basis of some assumption of the AO unless cogent material is brought on record. Therefore, we don t find any reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of Revenue s appeal is hereby dismissed. Income from House Property - deduction of interest on loan u/s 25 - the payment of interest was made from the account of her husband instead of her own account - HELD THAT:- There is no mention about the payment of the interest cost on the housing loan. In other words, it is not necessary to make the payment by the assessee on the money borrowed by him for acquiring the housing loan. What is necessary is this that the money should have been borrowed by the assessee for the purchase of the property on which the interest is payable. As far as, borrowing and the interest thereon is concerned, there is no dispute that the interest-bearing fund has been used by the assessee for acquiring the house property. Thus, to our understanding, the provisions of section 24(b) of the Act have been duly complied with as source of payment for the interest is known i.e. the husband of the assessee. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholder in the ratio of 1:1 per share. Accordingly the assessee gets 40000 bonus shares of M/s Shree Nath Commercial Finance Ltd. After lock-in-period of 1 year, the assessee sold 25,000 shares on 8th October 2012 @ of 38.39 per share and remaining 55,000/- share were sold during 4th December to 14th December 2012 at the price ranging between Rs. 69.3 to 71.39 per share. In the process, the assessee earned long term capital gain before STT at Rs. 39,44,687/- and net LTCG after STT at Rs. 39,37,423/- which was claimed as exempted income under section 10(38) of the Act. The AO on perusal of D-Mat account also observed that the assessee during the year has not made investment or entered into any transaction of other scrip except the sale of scrip of M/s Shree Nath Commercial Finance Ltd. Likewise, from the year 2005 to 2012, the assessee has not entered into such huge transaction of shares. Therefore, the AO to verify the genuineness of transaction of impugned shares summoned the assessee under section 131 of the Act. 5. In response to summon, the husband of the assessee namely Shri Rajiv Aggarwal appeared before the AO and recorded his statement. Shri Rajiv Aggarwal stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation required to be quashed. The learned CIT(A) after considering the facts in totality deleted the addition made by the AO by observing as under: 2.2 I have considered the facts of the case assessment order in also the submission made by the appellant. I find that AO has made the addition by considering the script as penny stock. AO has stated the appellant has not given reason for purchase of shares and also the price of share has increased very steeply during a short period and has also fallen down quickly. AO has also stated that this company has no credential and the sale rates are hiked artificially with no real buyers so that the inference of sale being bogus is correct. I find that the appellant has duly submitted all the documents with regards to purchase and sale of shares which includes copy of bills of purchases, copy of broker account, copy of bills for sale, copy of bank statement. I find that the appellant has purchased the shares-through proper recognized broker and has also paid STT at the time of purchase. The share purchased on 8/03/2011 have entered the demat a/c on 11/03/2011. The payment of purchases of Rs.894323/- have been made through cheque, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment or during any proceeding carried out by the Revenue or other agencies. In this regard, we note that the allegation by the AO has not made any reference to any such report, information or finding except merely a bald statement recorded in the assessment order. The dominant basis of treating the impugned long-term capital gain as bogus was based on assumption of the AO that the transaction carried out by the assessee are similar to modus operandi of penny stock. As such, it was the onus upon the AO to bring such facts on record before making the allegation against the assessee. In the present case the learned CIT-A after detailed verification has reached to the conclusion that the transaction carried out by the assessee was genuine and based on the documentary evidence. At the time of hearing, the learned DR has not brought any iota of evidence against the finding of the learned CIT-A. At the same time, we also note that there was no allegation against the broker through whom the assessee has purchased and sold the impugned script. What has been adopted by the AO for making the addition was the modus of operandi. To our understanding, the mere modus of operandi cannot the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. 4. Shares were sold through stock exchange after the payment of STT. The transactions have been confirmed by brokers. 5. The payments were received through ECS in the D-mat account. 6. Inflow of shares are reflected in D-mat account. Shares are transferred through D-mat account and buyer are not known to the assessee. 7. There is no evidence that the assessee has paid cash to the buyer or the broker or any other entry provider for booking LTCG and share were purchased by the determined buyer. 11.3 In our view, the income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and assumptions of certain facts. In order to hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In the absence of such finding, no adverse inference can be drawn against the assessee. 11.4 Now the controversy also arises whether a person who genuinely purchases the shares at a low price and sold at high price, therefore, he enjoyed the windfall from su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dabad 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, is therefore entirely unsupp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of Revenue s appeal is hereby dismissed. 12. The next issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowances of deduction claimed by the assessee under section 24 of the Act representing housing loan interest for Rs. 1.5 lakh. 13. The AO during the assessment proceeding found that the assessee has claimed deduction on housing loan interest of Rs. 1.5 lakh under section 24(1)(vi). However, the payment of the same was made from the account of her husband. Thus the AO disallowed the same and added to the total income of the assessee 14. On appeal by the assessee the learned CIT(A) deleted the disallowances made by the AO by observing as under: 3.2 1 have considered the facts of the case the assessment order and appellant submission. I find that the AO has disallowed the housing loan interest of Rs 1,50,000/-. I find that the appellant has taken the loan of Rs 1,64,00,000/- from Induslnd bank in the joint name. The name of Mamta Rajeev Agarwal is in the co-borrower, means the loan has been taken in the joint name of Rajeev Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which the payment was made by her husband. In this regard, we have referred to the provisions of section 24(b) of the Act which reads as under: 24. Income chargeable under the head Income from house property shall be computed after making the following deductions, namely:- (a) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 14 (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital: 17.1 On perusal of the above provisions, we note that there is no mention about the payment of the interest cost on the housing loan. In other words, it is not necessary to make the payment by the assessee on the money borrowed by him for acquiring the housing loan. What is necessary is this that the money should have been borrowed by the assessee for the purchase of the property on which the interest is payable. As far as, borrowing and the interest thereon is concerned, there is no dispute that the interest-bearing fund has been used by the assessee for acquiring the house property. Thus, to our understanding, the provisions of section 24(b) of the Act have been duly complie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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