TMI Blog2023 (8) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be sustained and set aside the order of the CIT(A) and direct the assessing officer to delete the additions and allow the grounds of appeal in favour of the assessee. - ITA No. 2586/Mum/2022 - - - Dated:- 2-3-2023 - SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHIR PAVAN KUMAR GADALE, JUDICIAL MEMBER For the Appellant : Shri Prakash Jhunjhunwala AR For the Respondent : Shri Tejinder Pal Singh Anand. DR ORDER PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC)/CIT(A), Delhi passed u/s 143(3) and 250 of the Act. The assessee has raised the following grounds of appeal: The appellant prefers an appeal against an order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 18/08/2022 on following amongst other grounds each of which are without prejudice to any other :- 1.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition u/s 68 of Long Term Capital gain on sale of STT paid listed share of M/s KDJ Holiday scapes and Resorts Ltd of Rs. 4,41,37,566/- and alleged undisclosed commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails of capital gains earned and related information. Further the assessee has filed the information on 02.06.2016, 14.06.2016 7-12-2016. The AO on perusal of the facts and information found that the assessee has purchased 1,00,000 shares of face value of Rs. 10/- at a premium of Rs. 12/- each of M/s Gomti finlease India Ltd on 16.01.2012 for a consideration of Rs. 22,00,000/- and the assessee has submitted allotment letter, approval of BSE for allotment of shares, bank statement, Demat account, holding of shares in Demat account, rate publication of BSE and financial statements. Further this company has acquired three companies of KDJ group and the shares having face value of Rs. 10/-each are split into 5 shares of Rs. 2/- each share and the total shares post split allotted are 5,00,000 shares credited in to the demat account. The assessee has sold the shares in the financial year 2013-14 at average price of Rs. 92/- per share at BSE through a SEBI registered broker. The AO has doubted the allotment of shares on the preferential issue at higher price and based on the investigation wing Kolkata report, trading of shares on stock exchange and statement recorded in search operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned that the transactions are not genuine and relied on the order of the CIT(A). 5. We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue is that the CIT(A) has confirmed the action of the AO in respect of addition of long term capital gains on sale of shares and estimated commission overlooking the submissions and evidence filed before the both the authorities in support of transactions of purchase and sale of shares made by the assessee. The assessee has purchased 1,00,000 shares of face value of Rs. 10/- at a premium of Rs. 12/- each of M/s Gomti finlease India Ltd on 16.01.2012 for a consideration of Rs. 22,00,000/- through banking channel and the assessee has submitted allotment letter, approval of BSE for allotment of shares, bank statement, demat account substantiating holding of shares, rate publication of BSE. Further this company has acquired three companies of KDJ group and the shares having face value of Rs. 10/- each are split into 5 shares of Rs. 2/- each share and the total shares post split allotted are 5,00,000 shares credited to the demat account. The assessee has sold the shares in the financial year 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o examine the company profile and made additions on presumptions and conjectures. The Ld.AR relied on the judicial decisions of Honble High Court and Honble Tribunal in support of e submissions. We find the facts and circumstances of the present case are similar and identical and pertains to A.Y.2014-15 in respect of sale of Shares M/s KDJ Holidayscapes and resorts ltd (earlier known as M/s Gomti Finlease (India) Ltd) dealt by the Coordinate Bench of the Honble Tribunal in the case ITO Vs. Shri Jimeet Vipul Modi in ITA No. 4297/Mum/2022 and has dismissed the revenue appeal observing at Page 4 Para 4.1 of the order read as under: 4.1 During appellate proceedings, the assessee again refuted the allegations of Ld. AO by way of elaborate written submissions which have already been extracted in the impugned order. The Ld. CIT(A), at the outset, noted that provisions of Sec.68 were invoked by Ld. AO to add back the purchase price of shares. However, the payment for purchase of shares was made through banking channels which stood corroborated by various documents submitted by the assessee. All the payment for purchases was made through account payee cheques which were debited in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor, when the prices were continuously falling, the assessee exited from the said script and booked losses to safeguard himself against future losses. The statement of Shri Nikhil Jain and Shri Bidyoot Sarkar as referred to by Ld. AO did not contain any reference to the assessee. The reliance on the said statement without any co-relation does not prove that the transactions were non-genuine. There was no evidence of any cash transaction and Ld. AO failed to bring on record any evidence to support the conclusions that the losses were not genuine. Rather the conclusions were based merely on surmises and conjectures. On the other hand, the assessee had furnished all the documentary evidences in support of the claim. 4.3 Finally, relying upon the decision of Hon ble Bombay High Court in the case of CIT vs. Mukesh Ratilal Marolia (ITA 456 of 2007 dated 07/09/2011), the decision of Hon ble Punjab Haryana High Court in case of Pr. CIT vs. Prem Lal Gandhi (ITA No.95 of 2017 dated 18/01/2018) and the decision of Delhi Tribunal in Chander Prakash vs. ITO in (ITA No.6880/Del/2017 dated 12/03/2018), the impugned additions as well as consequential addition of estimated commission, as made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to examine the alleged Directors of M/s. Diamant Infrastructure Limited as to the nature of business carried out by the said company nor has the AO examined the alleged brokers involved in the impugned transactions. We would like to place our reliance on the decision cited by the assessee in the case of DCIT Vs. Sunita Khumka ITAT, (Cul.) (2016) ITRV- ITAT- CUL.-057 which held that the transaction cannot be held to be bogus merely on the basis of suspicion or surmise and that the AO has to substantiate his finding by bringing material on record to prove collusion/connivance between the broker and the assessee for introducing unaccounted money. We would also like to place our reliance on the decision of Hon ble jurisdictional Bombay High Court in the case of Commissioner of Income Tax-13 Vs. Shyam R. Pawar wherein it was held that where D- MAT account and contract note showed details of share transaction, and AO had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income u/s 68. It is pertinent to point out that we have also considered the recent decision of Hon ble Calcutta High Court in the case of Principal Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jecture made by Assessing Officer Whether, on facts, impugned addition made under section 68 by treating impugned LTCG as bogus was unjustified and same was to be deleted - Held, yes [Paras 11 and 13 in favour of assessee] 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by Assessing Officer was rightly deleted Held, yes [Para 7] [In favour of assessee] It was revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange- words showed that the shares were purchased for code numbers S003 and R121 of STPL and RMPL pectively. Out of these two, only RMPL is listed in the appraisal report and it is stated to be involved in dusoperandi It is on this material that the Assessing Offices holds that the transactions of sale and purchase of shares are doubtful and not genuine. In relation to assessee's role in all this, all that the Commissioner observed is that the assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the assessee to the accounted income and the assessee utilized the scheme Para 5] The Tribunal concluded that there was something more which was required, which would connect the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no substantial question of law. arose from Tribunal's order - Whether SLP against said impugned order was to be dismissed -Held, yes (Para 2) (In favour of assessee) 13. Similarly Hon ble High Court in the case of Pr. CIT Vs. Prem Pal Gandhi, (401 ITR 0253) (P H) has observed as under: Capital gain-Share transaction-Addition-Deletion thereof-During course of assessment proceedings u/s 153A, it was noticed by AO that assessee had shown long term capital gain on sale of shares of company-AO treated share transaction as non-genuine transaction and amount was shown as long term capital gain on share transaction was added to income of assessee-CIT(A) deleted addition- Tribunal upheld order passed by CIT(A) and dismissed appeal of revenue-Held, assessee sold shares through MTL shares and Stock Broker limited which was SEBI registered Stock Broker-Payment for sale of shares was received through banking channels-All documentary evidence being in favour of assessee, deletion of addition made by CIT(A) was upheld by Tribunal-All these documentary evidences in favour of assessee were rejected by AO merely on basis of some casual replies given by assessee to AO- Documentar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence has been produced to establish the genuineness of the sale- Company has confirmed that it has handed over the shares purchased by the assessees. Similarly, the sale of shares to the respective buyers is also established by producing documentary evidence-Purchase and sale price of the shares declared by the assessees is in conformity with the market rates prevailing on the respective dates- Thus, the fact that some of the transactions were off- market transactions cannot be a ground to treat the transactions as sham transactions-Tribunal has arrived at a finding of fact that the transactions were genuine- Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence-Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. The fact that the assessees in the group have purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n: Assessees having established the genuineness of purchase and sale of shares by producing documentary evidence and declaring the purchase and sale price of shares in conformity with the market rates prevailing on the respective dates, the finding of the Tribunal that the transactions were genuine is a finding of fact based on documentary evidence on record and, therefore, no substantial question of law arises from the order of the Tribunal deleting the addition under s. 68. 15. We have considered the overall facts, submissions and the information find that the assessee has furnished the financials, details of broker, affidavit and the transactions status and MCA website details of the company. The AO has doubted the purchase and sale of shares and observed that the price rigging is not commensurate with the financials of the assessee company. The assessee has substantiated with all details and information and the revenue could not make out a case that there is unaccounted money transactions took place in the hands of the assessee and the AO has relied on the investigation report of income tax department and treated the long term capital gains on sale of shares as not gen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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