TMI Blog2023 (2) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... ring facts. Needless to say, the peculiarities and nuances of each case need to be seen in perspective. The overwhelming factor of extra-ordinary period of holding of shares prior to sale transcends all other considerations and exonerates the Assessee from any kind of impropriety. CIT(A), to our mind, has correctly approached the issue and recognized the difference between transactions which are pretense and the transactions which are real and rightly reversed the unsubstantiated additions. We thus see no reason to interfere with the conclusion drawn by the CIT(A). Objections raised by the assessee in terms of application filed under the shelter of Rule 27 of the Income Tax (Appellate Tribunal) Rules 1963 - In the instant case, the assessee has neither filed any cross-appeal nor cross-objection before ITAT in the Revenue appeal. The Assessee had not taken such ground earlier before CIT(A) either, to enable him to render its decision such point. In the absence of any ground on the point, the CIT(A) had thus no occasion to adjudicate the issue now raised before ITAT under Rule 27. The objections have been newly raised for the first time before ITAT taking shelter of Rule 27 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 2012, the suspension has been revoked Vide BSE notice dated 12.10.2012. Further, SEBI has passed an order vide dated 01 January, 2015 whereby SEBI suspended the trading of 22 securities including Effingo Textile Trading Ltd (earlier known as Malti Textile Mills Limited) . 4. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators . 5. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the assessee resorted to a preconceived scheme to procure long term capital gains by way of price difference in share transactions not supported by market factors . 6. The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal. 3. Briefly stated, the assessee is an individual deriving income from house property, capital gains and income from other sources. The assessee e-filed return of income for Assessment Year 2015-16 declaring total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unexplained income. The income was thus assessed at Rs.3,86,68,780/- as against the returned income of Rs.34,61,310/-. 4. Aggrieved, the assessee preferred appeal before the CIT(A). 5. Before the CIT(A), the assessee reiterated and pointed out certain sequential facts namely; that the assessee had originally acquired 2,39,040 equity shares of erstwhile Malti Textiles of face value of Rs.10/- each on 16.03.2000 for a total consideration of Rs.1,20,121/-. The name of the company was subsequently changed to ETTL w.e.f. 01.07.2013. The assessee dematerialized the holding of ETTL shares with the depositor participant (DP) namely Abhipra Capital Ltd. on 31.12.2012; that the assessee thereafter sold 2,35,000 equity shares of ETTL on 14.03.2013 out of total Demat share sholding of 239040 and thus left with holding of 4040 (239040 minus 235000) equity shares as on 31.03.2013 (FY 2012-13) which is reflected in the Demat statement issued by (DP); that remaining 4040 equity of ETTL of Rs.10/- each were converted into equity shares of face value of Rs.1/- on account of corporate adjustment as a result of stock split on 19.11.2013 and in lieu of which the assessee received 40400 equirty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee or the transactions carried out by Assessee. Even the SEBI/Exchanges has not found any wrong doing or guilty or violation of any rule or guidelines / SEBI Exchanges by selling shares of promoter quota by the assessee in the year under consideration and no order has been passed against the assessee on the issue of selling of shares in question. Also, the transactions have been carried out on the platform of Exchange through VFFL whereas the modus operandi identified some brokers but not VFFL. The assessee also reiterated the documents to clinch the factual position narrated hereinabove. 5.3 The CIT(A) recorded the detailed written submission made on behalf of the assessee and the judicial precedence extensively relied upon in its appellate order and found palpable merit in the plea of the assessee. 6. The relevant operative paragraphs of the first appellate order of the CIT(A) is reproduced herein for ready reference. Decisions 6.3 I have gone through the facts of the case and the submissions made by the AR. The facts of the case are elaborated in detail by the AO in the assessment order. The AO has discussed the general modus operandi adopted by the accommodati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was reflected in the details of investment of Sh. Manish Jain, son of the appellant, in hisaudited accounts with Schedules as at 31.03.2001 wherein the date of investment in the shares of Malti Textiles Ltd has duly been certified as 12.06.1989. The said facts are also 'mentioned in the assessment order. On perusal of details, it is noted that the holding period of the shares of Malti Textiles Ltd./Effingo Textile Trading Ltd. is more than fifteen and twenty years based on acquisition of the aforesaid shares by the appellant or by her son, who gifted the shares to appellant. It does not appear to be a case in which the investor will wait for more than fifteen and twenty years to get her black money converted through the price rigging. It is a common knowledge that in cases generally coming to the scanner of the department, the holding period of the shares in so called penny stocks ranges generally from 1 to 2 years and that too depending upon the price movement of the stock. In the modus operandi of bogus LTCG in penny stocks discussed by the AO also the holding period of such shares- has been mentioned as 1-2 years. In this case, the holding period is more than fifteen an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stine character of transactions recorded in the books of the beneficiaries including the assessee in the garb of Long Term Capital Gain. The ld. DR accordingly submitted that the AO has rightly denied the claim of exemption under Section 10(38) of the Act and treated the alleged sale consideration of ETTL shares of Rs.3,52,07,470/- as bogus and held the said amount as unexplained credit under Section 68 of the Act correctly. The Ld. DR asserted that the prices of the scrip ETTL were artificially inflated and manipulated which is supported by order of SEBI resulting in suspension of many scrips including ETTL. As further contended, the transactions were not governed by market factors but such unlawful gain was product of a design and mutual connivance under a preconceived scheme to procure the contrived capital gains. 9. The ld. AR for the assessee, on the other hand, stridently supported the action of the CIT(A). It was reiterated that it is an undisputed and documented fact that assessee or his son were holding the shares ranging between 15-25 years and thus the alleged modus operandi cannot be linked to or applied to the transactions carried out by the assessee. The shares wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res as unexplained cash credit u/s 68 of IT Act is unsustainable in law as such unexplained credits are outside the ambit of sec 68 of IT Act. Such illegality in invoking wrong section for making addition to income is a jurisdictional error which is incurable u/s 292BB of IT Act. 10.1 It was contended that the above ground is a legal ground and its adjudication does not require any intense investigation and relevant facts are explicitly available on records. It was insisted that the assessee was entitled to support the outcome of the order of the CIT(A) on all grounds including the ground taken in the impugned application notwithstanding that such ground was not raised before the CIT(A). The ld. counsel for the assessee contended that impugned addition of Rs.3,52,07,470/- treating the sales realization from sales of shares as unexplained cash credit under Section 68 is outside the sanction of law in the light of the fact that in the instant case where no income of the assessee is assessable as business income, the assessee is not required to maintain any books of account and in the absence of such books, the AO was not entitled to invoke Section 68 of the Act. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order) as allegedly involved in manipulations of price and providing accommodation entries in LTCG in several penny stock shares. It was further alleged that unlawful operations have been carried out to artificially increase the price and volume of the penny stock scrips to provide illegitimate gains to the beneficiaries. Based on such findings of the investigation report as reproduced in the assessment order, the Assessing Officer held that the entire sale consideration received on sale of ETTL shares by the assessee represents undisclosed income of the assessee and thus susciptible to tax under Section 68 of the Act. It was concluded that the Long Term Capital Gain so declared in ETTL and claimed as exempt income under section 10(38) is outcome of fabricated and pre-arranged method of purchase and sales of share and the true nature of such share transactions lacked commercial justification and such artifically structured transactions were entered into with sole intent to evade taxes. The Assessing Officer thus held that the capital gain reported by the assessee arises out of make-believe transactions and lacks bona fide . It was thus held the impugned transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.5 At the first blush, these undisputed facts appears self-explanatory and self speaking. The shares have been admittedly acquired decades earlier. It just doesn t add up to a common sense that a tax payer would be part of dubious racketing of price rigging and wait for eternity [ranging between 15-25 years] to convert his / her black money through some in-genuine price rigging in a very distant future. The genuineness of transaction has been doubted in the instant case merely because of the report of investigation wing and recording of statement of various unidentified promoters/brokers/associated person/ intermediaries etc. who are neither shown to be linked to the assessee herein nor any allegation has been shown to be made qua the assessee or the transactions under consideration. No SEBI report or exchange report is available to implicate the assessee per se with any wrong doing or guilty or violation of any Rules. No cross examination of these operators/intermediaries has been carried out. The Assessing Officer has taken drastic action against the assessee based on the generalized inputs received by him without taking cognizance of such overwhelming fact of staggerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itude provided in Rule 27 on those ground alone which were raised before the CIT(A) and adjudicated against him while addressing other points in its favour. In such circumstances, the respondent-assessee, not in appeal, may support the order of the CIT(A) on any of the grounds decided against him by the CITA). 12.3 In the instant case, the assessee has neither filed any cross-appeal nor cross-objection before ITAT in the Revenue appeal. The Assessee had not taken such ground earlier before CIT(A) either, to enable him to render its decision such point. In the absence of any ground on the point, the CIT(A) had thus no occasion to adjudicate the issue now raised before ITAT under Rule 27. The objections have been newly raised for the first time before ITAT taking shelter of Rule 27 of ITAT Rules. 12.4 The language of Rule 27 is absolute and measured. Patently, the prerequisites of Rule 27 are not fulfilled in the instant case. There must exist a ground decided against the assessee by the CITA) to invoke Rule 27 as an adjunct to Revenue appeal. Such vital condition is not found to be met. In the factual matrix, the legislative fiat of Rule 27 does not permit the ITAT to entertai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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