9911796707
TMI Blog2021 (12) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the revenue in the instant appeals we find that common issue relates to genuineness of claim of Long Term Capital Gain u/s 10(38) of the Act for sale of equity shares of listed companies denied by the ld. AO in the case of following assessees: Name of Assessee A.Y. Amount Name of listed Company Deepansu Mohapatra 2014-15 38,00,000/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 62,42,000/- M/s Lifeline Durgs & Pharma Ltd. Himansu Mohapatra 2014-15 39,34,500/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 61,12,000/- M/s Lifeline Durgs & Pharma Ltd. Sitansu Mohapatra 2014-15 61,25,908/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 37,25,000/- M/s Lifeline Durgs & Pharma Ltd. Anupama Mohapatra 2014-15 61,25,908/- M/s Kailash Auto Finance Ltd. (KAFL) 2015-16 62,58,250/- M/s Lifeline Durgs & Pharma Ltd. Amruta Preetam Mohapatra 2014-15 59,99,250/- M/s Kailash Auto Finance Ltd. (KAFL) Mamta Mohapatra 2014-15 56,73,845/- M/s Kailash Auto Finance Ltd. (KAFL) Kishore Kumar Mohapatra 2014-15 38,82,500/- M/s Kailash Auto Finance Ltd. (KAFL) Parbati Mohapatra 2014-15 50,83,000/- M/s Lifeline Durgs & Pharma Ltd. Kuntala Mohapatra 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case, the Ld CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains (L TCG) on sales of shares on the specious ground that the assessee was not qranted an opportunity to cross-examine the persons making adverse statement against the assessee, when facts on record reveal that no such opportunity for cross examination was sought by the assessee before the AO. Moreover, in their statements recorded before the Investigation Wing, Kolkata, (i) Shri Pawan Kumar Kayan, , one of the brokers, (ii) Shri Praveen Kumar Agarwal (iii) Shri Anuj Agarwal, another broker had stated that the shares of Mis Kailash Auto Finance Ltd (KAFL) w~ rigged to generate bogus Long Term Cap~ Gains through accommodation entries. When those statements were confronted to the assessee, he had not been able to controvert the averments made therein, as mentioned in the assessment order. Ground No. 5 : On the facts and in the circumstances of the case, the Ld.CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains(L TCG) on sale of shares of penny stocks of MIs Kailash Auto F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had suo motto offered the entire alleged L TCG for taxation without claim of exemption u/s 10(38) of the I.T. Act, 1961 by filing revised return of income and paid self-assessment tax thereon after survey u/s 133A of the I.T. Act, 1961 was carried out in this group of cases by the Investigation Wing, Bhubaneswar, based upon the inputs of Investigation Wing, Kolkata. The above action of the CIT(A) violates the ratio of decision of Hon'ble Supreme Court in the case of CIT vs M/s Shelly Products And Another (2003) 261 ITR 367 (SC), wherein it is held that no refund of tax would be granted on the admitted returned income even though the assessment is annulled. Ground No.8. The appellant craves leave to add, alter, amend one or more grounds of appeal before the appeal is heard. 6. The Revenue has raised the following grounds of appeal in ITANo. 43/CTK/2020:- Bogus Long Term Capital Gains Generated on Sale of Penny Stock of Rs.62,42,000/- Ground No.1: On the facts and in the circumstances of the case, the Ld.CIT(A) was not justified in law~ accepting the claim of the assessee regarding exemption uls 10(38) with regard to alleged income of Rs. 62,42,000/- under the head &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to controvert the averments made therein, as mentioned in the assessment order. Ground No. 5 : On the facts and in the circumstances of the case, the Ld.CIT(A), Cuttack was not justified in allowing the claim of the assessee regarding Long Term Capital Gains(L TCG) on sale of shares of penny stocks of M/s. Lifeline Drugs & Pharma Ltd. (LD& DL)by merely relying upon a couple of decisions of ITAT Benches, ignoring the following judgments of various High Courts and Tribunals, which are rendered in favour of revenue on the same issue of "Penny Stocks": (a) CIT vs Sanghamitra Bharali (2014) 361 ITR 481 (Gauhati) (b) Sanjay Bimalchand Jain vs. Pr.CIT (2018) 89 taxmann.com 196 (Bombay) (c) Purviben Snehalbhai Panchhigar vs. ACIT (2018) 409 ITR 124(Guj) (d) Udit Kalra vs. ITO, Ward-SO(1) [ITA No.220/2019 of Delhi High Court, date of order - 08.03.2019] (e) Ratnakar M Pujari vs. ITO, Ward-2S(3)(3), Mumbai [ITA No.99S/MUM/2012 dt.09.0S.2016 (f) Pooja Ajmani vs ITO [ITA No.S714/De1/2018 dt.2S.04.2019] (g) Sanat Kumar vs. ACIT, Circle-36(1), Delhi [ITA No.1881/DeI/2018] (h) Abhimanyu Soin vs. ACIT, Circle VII, Ludhiana [ITA No.9S1/Chd/2016 dt.18.04.2018] (i) Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is an individual earning income from various sources including income from truck plying, income from Long Term Capital Gains (LTCG) and income from other sources. The original return of income for A.Y. 2014-15 was filed on 29.07.2014 disclosing a total income of Rs.4,79,990/- and claimed exemption of LTCG u/s 10(38) of the Act. A survey operation u/s 133A was conducted on the business premises of Shri Kishore Kumar Mohapatra Group on 22.07.2015. During the course of this survey the assessee who is a family member of this group, was confronted with the statements of directors of certain Kolkata based companies whose shares bought and sold in the stock market by assessee. It appears that these Kolkata based companies were under the scanner of the I.T. Department for allegedly providing accommodation entries and had subsequently been subjected to search and seizure operations. A list of beneficiaries who had allegedly taken accommodation entries from these Kolkata based companies had been drawn up by the I.T. Department and the family members of the Shri Kishore Kumar Mohapatra Group featured in it. Consequently the assessee filed a revised return of income for A.Y. 2014-15 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AFL) & M/s. Lifeline Drugs & Pharma Ltd. (LD& DL) respectively. 10. In the appellate proceedings it was submitted by the assessee that the purchase of equity shares in question was made through account payee cheque, shares were held in the Demat Account, equity shared were held for more than 12 months and sold through recognized stock exchange after payment of security of transaction tax. It was also submitted that Ld. AO erred in accepting the revised return for A.Y.201415 and also disregarding the claim of LTCG u/s 10(38) of the Act made for A.Y.2014-15 & 2015-16 during the assessment proceedings without bringing anything contrary on record to prove that the claim was bogus. It was also submitted that the ld. AO merely relied on an investigation report in case of 3rd party which was prepared much before the date of survey. Nothing incriminating material relating to the alleged transaction was found with the assessee during the survey proceedings and also assessee was not afforded any opportunity to cross examine the person whose statement have been relied by the revenue authorities. The assessee also placed reliance on various decisions before the ld. CIT(A). ld. CIT(A) after ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of assessment proceedings revise computation was filed along with documentary evidences claiming that the assessee deserves the benefit of exemption u/s 10(38) of the Act. Reference was also made to CBDT circular No.286/98/2013 dated 09.01.2014 which strictly debars the Revenue Authorities from obtaining admission/statement during the course of survey rather, insisted on collecting evidences. To support this contention that claims not made in the return can be claimed at the time of assessment for assessing the correct income of the assessee, reliance placed on following decisions: 1. Hon'ble Gujarat High Court in the case of Gopal Bhai Babu Bhai Parikh -vs- Pr. CIT-4, reported in [2021], 127 taxman.com 245 (Guj 2. Hon'ble Bambay High Court in the case of Sanchit Software & Solutions (P.) Ltd. -vs- Commissioner of Income Tax-8, (Bombay), reported in [2012], 25 taxman.com 123 (Bombay), 3. Hon'ble Bombay High Court in the case of CIT, Central-1 -vs- M/s. Pruthvi Brokers and Share Holders in ITA No.3908/2010 vide its order dated 21.06.2012 4. Hon'ble Bombay High Court in the case of CIT -vs- Prabhu Steel Industries Pvt. Ltd., reported in [1988], 171 ITR 530 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee since no opportunity of cross examination was provided to confront the third party whose statements were used against the assessee. 18.1. We notice that during course of survey, assessee under compulsion and pressure has admitted and paid tax on the exempted LTCG by way of revising returns for Assessment year 2014-15 and declared the exempt capital gain as taxable gain, but subsequently, after examining the fact and law, found that, the admission of exempted income as taxable income and payment of tax on exempted income is wrong. The Assessee retracted from his own admission and vehemently objected before the A.O. that, the impugned admission as well as the tax paid on exempted capital gains is wrong. To justify his retraction, he submitted all necessary evidences and the learned A.O. could not dispute the evidences produce by the Assessee. Even the learned A.O. could not question the evidences and has accepted it. The rebuttal is permissible in the eye of law, if it is supported by the corroborative evidences. 18.2. The CBDT circular vide F.No.286/98/2013 dt.09.01.2014 and F.No.286/2/2003 had strictly debarred the Authority from obtaining admission statement during course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m that he was entitled to exemption under section 10(10C) on amount received under early retirement scheme - On basis of same, Assessee filed an application before Commissioner seeking to claim exemption under section 10(10C) - Commissioner disallowed same on ground that Assessee had not claimed exemption during filing of return - Whether even if Assessee had not claimed exemption in his return of income, he could claim same later in point of time-Held, Yes - Whether thus Assessee was to be allowed exemption under section 10(10C) on such amount received from bank under early retirement scheme - Held, Yes. 18.7 Hon'ble Bombay High Court in the case of Sanchit Software & Solutions (P.) Ltd. -vs- Commissioner of Income Tax8, (Bombay), reported in [2012], 25 taxman.com 123 (Bombay), in paragraph Nos.5, 6 & 7 of its order have held that, it is judicially settled Assessing Officer not to take advantage of Assessee's ignorance: In any civilized system, the Assessee is bound to pay the tax which he liable under the law to the Government. The government on the other hand is obliged to collect only that amount of tax which is legally payable by an Assessee. The entire object of admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out adhering the principles of natural justice which constitutes bedrock in any quasi-judicial proceeding. A.O's reliance on the statement of so called entry operators to justify the additions U/s.68 and 69 of the Act was factually unsustainable, because the statement of entry operators were recorded on various dates connected with some other proceeding and not at all connected with the Appellant proceedings and it is also not known as to what was the condition in which the makers of the statement made the statement and in what context they made the statement. These statements were recorded much before the date of survey conducted upon the Appellant. Admittedly, these statements were recorded in absence/back of the Appellant, therefore, the Appellant did not have any means to determine the veracity or correctness of the averments made in these statements. In the above background, if the A.O. intended to use these statements to draw adverse inference against the Appellant, he himself ought to have examined these entry providers to ascertain the correctness of facts and in case, if it is revealed by these entry operators as to any role of the Appellant or connection with the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the A.O. failed to perform his twin duties that of the investigator and adjudicator resulting in the additions being vitiated in the process. 18.12 Our view is supported by the judgment of the Hon'ble Apex Court in the case of CIT -vs- Odeon Builders (P) Ltd. reported in 110 Taxman.com 64 (SC) involving similar facts as involved in the present case. In this decided case, the Revenue had disallowed the purchase made by the Assessee holding it to be bogus based on the statement given by a third party. On appeal, the learned CIT(A) deleted the addition holding that, on one hand, the Assessee has discharged his initial burden whereas, on the other hand, the Revenue had denied the opportunity of cross-examination to the Appellant. On the self same reasoning, the Hon'ble Tribunal and later the Hon'ble high Court also dismissed the appeal of the Revenue. The Hon'ble Supreme Court in paragraph No.3 of their judgment have held that, a disallowance was based solely on third party information which was not subjected to any further scrutiny. The entire disallowances in this case is based on third party information gathered by the Investigation Wing of the Department which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is made on the basis of statement of 3rd party, a proper opportunity of cross examination should be given to the affected party and if the same is not done, action of the Ld. AO making additions cannot be held to be justified. We, therefore, dismiss revenues common ground no.1,2,4 & 7 raised for A.Y.2014-15 & 2015-16 in the instant appeals. 19. Now we take up common ground no.3 & 6 raised on merits of the case. To keep the facts straight we notice that the assessee purchased the equity shares by making payment through banking channel. Subsequent to certain merger and split of equity shares assessee hold the equity shares of the limited company in question in the Demat Accunt and held them for more than 12 months and thereafter the same was sold through recognized stock exchange after paying security transaction tax. So far as the A.Y. 2014-15 is concerned we find that the assessee purchased 1,00,000/- shares of Panchashul Marketing Ltd. for Rs.1,00,000/- each share @ Re.1/- on 21.11.2012. These shares were purchased though Jatadhari Marketing (P) Ltd. and amount of Rs.1,00,000/- was paid by Cheque No.504054 from his SB A/c. No.30160100000851 with Bank of Barod, Bhadrak. The ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,49,000 7,000 07.10.2014 17,43,000 3,000 07.11.2014 7,41,000 25,000 62,42,000 19.3 After deduction the cost price of Rs.50,000/- and other expenses including STT the Net Long Term Capital Gains was computed at Rs.61,59,697/-. 19.4 All the above details of purchase and sales were placed before the ld. AO along with contract notice for purchase and sale, Demat Account and Bank statement and Ld. AO could not find any mistake or defect in these documents. Action of the Ld. AO of treating the alleged LTCG as bogus was solely based on the enquiry report carried out in the case of 3rd persons much before the date of survey conducted at the assessee premises. Nothing incriminating was found during the course of survey to challenge the genuineness of documents filed by the assessee. Ld. AO also could not bring on record any evidence to prove that the assessee had any direct connection with the alleged entries operators or the management of the listed companies in question. Under these uncontroverted fact we find that Ld. CIT(A) has rightly deleted the addition for bogus LTCG made u/s 68 of the Act by the ld. AO observing as follows: Finding for A.Y. 2014-15 I have p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee through SEBI authorized brokers, M/s. Destiny Securities Ltd (SEBI Registration no. INB011241834) and M/s. Motilal Oswal Securities Ltd. on 05/02/2014, 06/02/2014 and 24/03/2014 for Rs. 37,96,200/-. The amount received after payment of Security Transaction Tax (STT) and brokerage was Rs. 37,91,465/-. This amount was received by the assessee through Savings Bank account no. 30160100001797 with Bank of Baroda, Bhadrak on 13/02/2014 and 24/03/2014 and the assessee, after computing the income from capital gains, claimed the same as exempt 1/s.10(38). The order of the Hon'ble Income Tax Appellate Tribunal, "A" Bench, Kolkata in the cases of Shri Manish Kumar Baid V /s ACIT, Cirke35, Kolkata (ITA No.1236/Kol/2017 for 2014-15) and Shri Mahendra Kumar Baid V /s ACIT, CircIe-35, Kolkata (ITA. No. 1237/Kolj2017 for AY.- 2014-15) has also been perused by me. The ground of appeal raised before the ITAT, Kolkata is identical to the issue being contested in the case before the undersigned and is being reproduced herewith-: If For that under the facts and in the circumstances of the case the Income as determined under head other sources at Rs. 38,00,000/- should have been treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AD to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AD was not justified in rejecting the assessee's claim of exemption under section 10(38) of the Act. We also find that the various case laws of Hon'ble jurisdictional High Court relied upon by the ld AR and finding given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AD was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s. 68 of the Act.' The ITAT, Delhi Bench "SMC", New Delhi adjudicated on an identical issue in the case of Vidhi Malhotra v /s ITO, Ward-2(S), Faridabad (ITA No. 93/Del/2018 for AY.-2014-15 and Santosh Mendiratta vIs. ITO, Ward-2(3), Faridabad (ITA No. 94/Del/2018 for AY.- 2014-15). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fected on a recognized stock exchange. The shares had been held for a period of more than twelve months and securities transaction tax (STT) had been paid at the time of the transfer. Hence, the amount received by the assessee is undeniably in the nature of a long term capital gain (L TCG). The AO's action was based entirely on surmises and suspicions and at the same time. the AD was unable to rebut the concrete evidence tendered by the assessee in support of his claim. Further, the prevailing weight of judicial opinion is heavily in the assessee's favour as adduced by the decision of the Hon'ble Kolkata and Delhi Bench of the I.T.A.T. where the issue adjudicated was identical to the facts in the assessee's case. Hence the addition of Rs.59,99,250/- made by the AO is hereby deleted and the assessee's appeal is upheld. Finding for A.Y. 2015-16 I have perused the facts of the case and have examined the assessment order u/s. 143(3) for AY.- 2015-16 dt. 30/06/2017 as well as the detailed arguments tendered by the counsel for the assessee. Now, in the original return for AY.- 2015-16, the assessee had made a claim u/s. 10(38) on the long term capital gains earned on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt and, consequently, proceeded to make the disallowance. Now, unlike section 132(4) which treats the statements recorded during a search operation as 'evidence' in any proceeding under the ~ Act, 1961, section 133A, while authorizing recording statements by the survey officer, does not give the same status of 'evidence' to such recorded statements. It is therefore open to the assessee to explain this 'statement' to the AO during the course of the assessment proceedings which would also include the circumstances under which such statement was recorded and whether the same was taken in a state of duress. From this it follows that if the assessee were to retract his statement and pursue a course of action in assessment proceedings which conflicts with his recorded statement, he would be well within his rights to do so. In other words, a retracted statement cannot justify an addition by the Assessing Officer and the latter must. necessarily look to other corroborative evidence The appellant submitted that the shares had been held for more than twelve months and were transferred through a recognized stock exchange after duly paying securities transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced herewith-: "For that under the facts and in the circumstances of the case the Income as determined under head other sources at Rs. 38,00,000/- should have been treated as income from Long Term Capital Gains out of dealing in shares and the learned AD should have allowed exemption u/s. 10(38) as claimed." After extensive deliberation, the ITAT gave its verdict vide order dt. 18/08/2017 and upheld the assessee's claim tor exemption of long term capital gains (LTCG) u/s. 10(38) in respect of the sale of shares of MIs. Kailash Auto Finance Ltd. (KAFL). The relevant extracts from the ITAT order are as under-: 'We find force in the arguments of the ld AR that the Id AD was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgment of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd Vis. ACIT (2017) 164 lTD (supra) for this proposition wherein the tribunal held as under-: "Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra v /s ITO, Ward-2(S), Faridabad (ITA No. 93/Del/2018 for AY.-2014-15 and Santosh Mendiratta vIs. ITO, Ward-2(3), Faridabad (ITA No. 94/Del/2018 for AY.- 2014-15). In both these appeals, the assessee's had claimed exemption u/s. 10(38) on the LTCG in respect of sale of shares of Mis. Kailash Auto Finance Ltd (KAFL) but the same were denied by the AD by holding the transaction to be a colourable device to route the assessee's unaccounted income. The ITAT, SMC Bench, Delhi vide order dt. 20/12/2018 upheld the claim of exemption u/s. 10(38) and held as under-: "Thus, SEBI also did not find any prima facie material for manipulation of price of scrip of Kailash Auto Finance Limited. If AO had found out that scrips of Kailash Auto Finance Limited was used by certain persons for providing accommodation entry, then he should have carried out some prima facie inquiry to find out whether assessee too was involved in routing her own unaccounted money for getting bogus term capital on the scripts of such company. General observation about the modus operandi of long term capital gain would be of no use unless and until there is some specific information and material qua the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares u/s 10(38) of the Act and the assessee is not found to be part of the alleged group of accommodation entry providers then the claim made for exempt income u/s 10(38) of the Act should not be denied. 19.6 Similar view was also taken by Coordinate Bench Mumbai, The relevant finding of Coordinate Bench Mumbai in case of Ramprasad Agarwal vs. ITO vide ITA No.1228/M/2018 has held as under: In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account." Thus, it is clear that the Tribunal in the said case has analyzed an identical is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by the company at par of face value. Hence, in view of the facts and circumstances when we hold that the order of the Assessing Officer treating the long term capital gain as bogus and consequential addition made to the total income of the assessee is not sustainable. Hence, we delete the addition made by the AO on this account." 10. It is clear from the above that the facts of the case of the assessee are identical with the facts in the above case wherein the co-ordinate bench of the Tribunal has deleted the addition. We, therefore, respectfully following the same set aside the order of Ld. CIT(A) and direct the AO to not to treat the long term capital as bogus and delete the consequential addition. 11. In the result, appeal of the assessee is allowed. 19.7. Similar view was also taken by Coordinate Bench Indore. The relevant finding of Coordinate Bench Indore in case of Shivnarayan Sharma & Ors vide ITANo.889/Ind/2018 & others dated 28.06.2021 reads as follows: 19. Subsequently Co-ordinate Bench of Jaipur in the case of Ashok Agrawal V/s ACIT in ITA No.124/JP/2020 dated 18.11.2020 has followed the decision of Hon'ble Mumbai Tribunal in the case of Dipesh R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusion as to whether the claim is genuine or not has been discussed at length. And referring to legal proposition laid down by the Hon'ble Supreme Court that the burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidence held that the modus operandi, generalisation, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee unless specific evidence is brought on record to controvert the validity and correctness of the documentary evidences produced, the same cannot be rejected. We are in complete agreement with the said view and in the instant case, we find that evidence produced by the assessee in support of his claim of purchase and sale of shares on the stock exchange have not been refuted by any adverse findings or material which could demonstrate involvement of the assessee or collusion with so called accommodation entry providers to obtain bogus LTCG as so alleged by the authorities below. 24. We also find that while analyzing sale of shares of similar scrip of M/s Sunrise Asian Ltd and claim of exemption of long term capital gains u/s10(38), the Mumbai Benches of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Mumbai and Jaipur has dealt in the issue of relating Long Term Capital Gain eared from sale of equity shares of M/s SAL holding it to be a genuine gain and in this context we also note that in the case of Shri Shivnarayahn Sharma and Prayank Jain the alleged company is M/s Conart Traders Ltd subsequently merged with M/s SAL under the order of Hon'ble Mumbai High Court and therefore the above stated decision will be squarely applicable in the case of these two assessee(s). 21. Further we observe that in the case of Govind Harinarayan Agrawal HUF, Manish Govind Agrawal HUF alleged issue of gain from share is from sale of equity shafes of Turbotech. Similar type of issue of the alleged bogus of Long Term Capital Gain from sale of shares of Turbotech came up before the Co-ordinate Bench held in the case of Swati Luthra wherein the Co-ordinate Bench has decided in favour of the assessee allowing both the grounds raised on merits as well as legal observing as follows:- 12. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. We find that the transactions of the assessee of purchase of shares of M/s Esteem Bio a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is has been held so by various courts, and also by Hon'ble Apex Court in the case of M/s Andaman Tiimber Industries vs. CCE (SC) reported in 127 DTR 241 has held as follows: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue confirming the order of the Tribunal stating it to be the last fact finding authority who on the basis of evidence brought on record has rightly came to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. Relevant extract of the judgment of Hon'ble Delhi High Court in the case of PCIT V/s Krishna Devi & Others is reproduced below:- '10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Govind Agrawal (HUF) as they have sold the equity shares held in Demat account and transactions performed on a recognised stock exchange through registered broker at the price appearing on the exchange portal and at the point of time of sale of equity shares, companies were not marked as shell companies by SEBI and nor the trading of these scrips were suspended. The assessee also deserves to succeed on the legal ground as no opportunity was awarded to cross examination the third person which were allegedly found to be providing accommodation entries and therefore no addition was called for in the hands of the assessee without providing opportunity of cross examination in view of the ratio laid down by Hon'ble Apex Court in the case of Andaman Timber Industries vs. CCE 281 CTR 241 (SC) that "not allowing the assessee to cross examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected". 24. We accordingly in view of our above discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... split in the ratio of 10:1 and the assesee had 10 lac shares. Out of the 10 lac shares the assesee had in March, 2010 i.e in the period relevant to the immediately preceding year sold 1,32,500 shares and the LTCG arising on the same was claimed by him as exempt u/s 10(38) of the Act. On a specific query by the bench as regards the treatment given by the department to the LTCG on sale of 1,32,500 shares of JMD Telefilms Industries Ltd. by the assessee in the immediately preceding year i.e A.Y 2010-11, it was submitted by the ld. A.R that the department had on a similar footing declined the assessee's claim for exemption u/s 10(38) of the LTCG arising from the sale of shares during the said year and, had added the sale consideration of shares as an unexplained cash credit u/s 68 of the Act. It was submitted by the ld. A.R that the assessee had challenged the said assessment order and the same as on date is pending before the CIT(A). Out of the balance 8,67,500 shares the assessee had transferred 1,00,000 shares to his wife Mrs. Mridulla Gupta through an unregistered gift deed. The balance 7,67,500 shares were sold by the assessee during the year under consideration i.e over the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd stock split; and that the assessee had invested only in a few shares besides M/s JMD Telefilms Industries Ltd., are observations which though would reveal that the assessee was not that well informed about the stock market, but then, we are afraid that the said fact on a standalone basis cannot justify holding the transaction of purchase/sale of shares by the assessee as a bogus transaction. At this stage, we may herein observe or in fact not loose sight of the fact, that as observed by the CIT(A), the assessee is a director of several West Coast Group Companies and he and his family members were/are directors in 17 public limited and private limited companies which are either promoted by them and/or promoted by their relatives. As regards the observations of the A.O that the information received from the Directorate of Investigation, Kolkata revealed the modus operandi that was adopted by the promoters/operators/brokers a/w the beneficiaries for obtaining bogus LTCG/STCL entries, we find that the same are only in the nature of general observations and the same on a standalone basis in the absence of any material/evidence proving that the assessee had colluded with the promoters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placing on record the copy of the cheque a/w copy of his bank account reflecting the said transaction. Further, we find that the aforesaid one lac shares of JMD Telefilms Industries Ltd which were purchased by the assessee by way of a preferential allotment on basis of an off-line transaction were thereafter dematerialized by him on 30.06.2009 via Motilal Oswal Securities Limited and were thus credited in the said account much prior to their sale. Thereafter, the aforesaid one lac shares were split in the ratio of 10:1 and the total number of shares increased to 10 lac. Out of the 10 lac shares, the assessee after selling 1,32,500 shares in the immediately preceding year was left with 8,67,500 shares. Out of the 8,67,500 shares the assessee had during the year under consideration gifted 1,00,000 shares to his wife Smt. Mridulla Gupta. The balance 7,67,500 shares were sold by the assessee on the floor of BSE through his broker Motilal Oswal Securities Limited for a consideration of Rs. 6,06,49,780/-. Backed by the substantial documentary evidence filed by the assessee which beyond doubt substantiates the genuineness of the transaction of purchase and sale of shares of JMD Telefilms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order it was observed by the Hon'ble High Court, as under : 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings 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 pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly an assumption based on conjectures made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provision of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or sham and bogus. It was observed by the Hon'ble High Court, that if the purchase and sale of shares that were reflected in the assessee's de-mat account were to be termed as arranged transactions, and projected to be real, then, such conclusion of the CIT(A) and the A.O required a deeper scrutiny. It was further observed that the Tribunal had rightly concluded that there was something more which was required, which would connect the assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. Observing that the Tribunal after extensively referring to certain facts/documents, viz. the sale of 20,000 shares of Mantra Online Ltd for a total consideration of Rs.25,93,150/- by the assessee a/w the details as to how they were sold, on what dates and for what consideration, and the fact that the sale consideration was received vide account payee cheques; copy of de-mat account of the assessee showing the share transactions; contract notes of the brokers (which are system generated documents prescribed by the stock exchange) giving details of transactions; the Hon'ble High Court observed that the Tribunal had rightly concluded that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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