TMI Blog2023 (1) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... f whose statements reliance has been placed to hold that the sale of shares was sham / bogus -CIT(A) has not erred in law and in facts in allowing the assessee s appeal. - ITA No. 2398/Ahd/2018 - - - Dated:- 20-1-2023 - Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri S.N. Soparkar, A.R. For the Revenue : Shri Pooja Parekh, Sr. D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-2, Ahmedabad in Appeal no. CIT(A)-2/10241/ACIT, Cir. 2(1)(2)/2017-18, in proceeding u/s. 143(3) vide order dated 11/09/2018 passed for the assessment year 2015-16. 2. The Department has raised the following Grounds of Appeal:- 1. The Ld.CIT(A) has erred in law and on facts in deleting the addition u/s 68 made by the AO treating the LTCG claimed by the assessee as bogus. 2. The appellant craves leave to amend after any ground or add a new ground which may be necessary. 3. The brief facts leading to the present appeal are that the AO made addition of Rs.2,88,72,634/- being sale proceeds of 2 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cals Ltd, where share price rose from 1.5 to Rs. 69/- in La Opala Limited from Rs.57 to Rs.1,687/-. Aventee Feets Limited from Rs.31/- to Rs. 2,124/- and Eitcher Limited from Rs. 975/- to Rs.15,733/-. The assessee also submitted that the case of Sanjay Bimalchand Jain relied by the AO is distinguishable on facts. In the above referred case, assessee has shown long term capital gain from a penny stock Kolkata based company M/s. Khoobsurat Limited. There was a clear cut modus operandi in which purchase was doubted as the purchase of share of private company was made in cash in a company controlled by Kolkata based broker. In the assessee s case, it has purchased the share at face value at Ahmedabad and made payment of Rs.20,00,000/- by cheque and held it in the DMAT account for three years. The appellant contended that the genuineness of purchase and sales of shares are well documented, and therefore, its genuineness cannot be doubted on the facts. 5. The Ld. CIT(A) agreed with the view of the assessee and allowed the appeal of the assessee with the following observations: The AO has made the addition of Rs. 2,88,72,634/- u/s. 68 of the I. T. Act, 1961 on the sale of 2 lac sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 crore on sale of shares of M/s. Naisargik Agritech India Ltd. does not by itself prove that the purchase and sales of appellant is not genuine. The addition u/s. 68 on long term capital gain cannot be made merely on suspicion and on high capital gain. Appellant has submitted number of share scripts listed on the stock exchange in which there have been gain from 16 to 71 times between the Financial Year 2011 to 2014, For instance, the shares of Marksons Pharmaceuticals Ltd. which were priced at Rs.2.70 per share in March, 2011 has rose to Rs.50 per share in August, 2014 which has gone up by 18 times. The long term capital gain in the penny stock companies are to be examined on its own facts. In appellant's case, there is no material brought out by the AO to suggest that the purchase and sales of the shares were bogus. The Honourable Kolkata Tribunal in the case of DCIT Vs. Sunita Khema in ITA No.714 to 718/KOL/2011 has held that the AO cannot treat transaction as a bogus only on the basis of suspicion or surmise. He has to bring material on record to support his findings that there has been collusion / connivance between the broker and the assessee for the introduction of it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the period of three years by the assessee and then sold. He drew our attention to memos of stockbroker and submitted that the shares were sold through renowned stock broking firms. The counsel for the assessee further submitted that the AO during the course of assessment did not make any independent enquiry on allotment of shares of Naisargik Agritech to the assessee. The AO did not make enquiry whether Naisargik Agritech is a genuine company or not. The additions were only made on account of suspicion that since the trading in respect of the above shares were suspended by the stock exchange, the share transaction made by the assessee is bogus. In this case, the AO has not examined the company Naisargik Agritech or any of its Directors to ascertain its genuineness. Further, the counsel for the assessee drew attention to page 59 of the paper book and submitted that besides the above share, the assessee has also made investment is in approximately 15 more companies. Therefore, it cannot be stated that just because the assessee has taken a calculated risk in one of the companies, the transaction is bogus and the assessee should not be denied benefit of long-term capital gains in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o addition can be sustained in the hands of the assessee. 3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income-tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant. 7.1 In the case of Himani M. Vakil [2014] 41 taxmann.com 425 (Gujarat) , the Gujarat High Court held that where assessee duly proved genuineness of share transactions by bringing on record contract notes for sale and purchase, bank statement of broker and demat account showing transfer in and out of shares, Assessing Officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. 7.2 In the case of Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat) , the Gujarat High Court held that where assessee proved genuineness of share transactions by contract notes for sale and purchase, bank statement of broker, demat account showing transfer in and out of shares, as also abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. . 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. (ii) The Lucknow ITAT in the case of Achal Gupta vs. ITO (ITAT Lucknow) I.T.A. No.501/Lkw/2019 held that the documents demonstrates that the assessee had purchased shares through Brokers for which the payment was made through banking channels. The assessee had sold shares through an authorized stock broker and payment was received through banking channels after deduction of STT. The AO has not doubted any of the documents. The only objection raised is that the scrip from which the assessee had earned Long Term Capital Gain has been held by the Investigation Wing of the Revenue to be a paper entity and that this scrip was being used for creating artificial capital gain. The objection was not found to be acceptable. (iii) The Mumbai ITAT in the case of Dipesh Ramesh Vardhan v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising from sale of shares. The assessee during the relevant period had sold shares of M/s. Sunrise Asian Ltd. for a consideration of Rs.14,99,917/-. The authorities below held the sale transaction in aforementioned scripts as bogus and thus, made addition under section 68 of the Act. We find that similar disallowance was made in the case of Narayan R. Rathi (father-in-law of the present assesse/appellant) for the assessment year 2014-15. Narayan R. Rathi had also sold the shares of same company i.e. M/s. Sunrise Asian Ltd. The issue travelled to the Tribunal. The Co-ordinate Bench of the Tribunal in ITA No. 4811/Mum/2018 (supra) deleted the addition. The Tribunal while allowing the appeal of Narayan R. Rathi held that the principles of natural justice were violated, the benefit of cross examination was not afforded to the assessee, hence, the addition is unsustainable . The relevant extract of the finding of Tribunal are reproduced herein below:- 11. The authorities below have not doubted the documentary evidence produced by the assessee to prove the genuineness of the transaction of sale and purchase of the shares in question. Further, the authorities below have not po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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