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TMI Blog2023 (9) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... judice to one another : 1. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of A.O. in making additions in the appellant's case in the absence of any incriminating material found, as per the grounds stated in the order or otherwise. 2. On the facts and circumstances of the Appellant's case and in law the Ld. CIT(A) erred in confirming the action of Assessing Officer in treating the long term capital gains earned by the appellant as non-genuine and bogus transaction, as per the grounds stated in the order or otherwise. 3. On the facts and circumstances and in law the Ld. CIT(A), erred in confirming the action of Assessing Officer in disallowing the claim u/s 10(38) of the Act being Long Term Capital Gain on sale of shares listed on Stock Exchange. 4. On the facts and circumstances of the Appellant's case and in law, LD. CIT(A) erred in confirming the action of Assessing Officer in making an addition of Rs. 8,98,43,280/- by invoking the provisions of Sec. 68 of the Income Tax Act, 1961, being the amount of sale value of shares without allowing the deduction in respect of the purchases cost amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were initiated and notice under section 148 of the Act was issued on 28/09/2016. During the reassessment proceedings, the assessee filed a letter intimating about the death of Mr. Hasmukhbhai B. Patel, on 15/07/2013, and the appointment of a legal heir, viz. Mr. Amit H. Patel, as the new Karta of the assessee HUF. During the reassessment proceedings, it was observed that the assessee has claimed an exemption of long-term capital gains of Rs. 8,18,51,632, on the sale of shares of Comfort Intech Ltd and Splash Media under section 10(38) of the Act. Since the quantum of huge long-term capital gains was found suspicious, the assessee was asked to show cause as to why the said long-term capital gains be not disallowed and the entire sale consideration of Rs. 8,67,07,353, on the sale of shares of Comfort Intech Ltd. and Splash Media, be not added to the total income of the assessee under section 68 of the Act. In response thereto, the assessee submitted that it purchased 5,00,000 shares of Comfort Intech Ltd for a total consideration of Rs. 85,55,000, having a face value of Rs. 10 per share in May 2008. Subsequently, the company on 14/10/2009, split its share of the face value of Rs. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was further held that even though the net worth of the company and the business activity is negligible the share prices have been artificially rigged to unusual high. The AO held that the assessee is having its Demat account with M/s Comfort Securities Ltd. The company Comfort Intech Ltd, M/s Comfort Securities Ltd, and Splash Media and Infra Ltd, all are controlled and managed by Mr. Anil Agarwal, who in his statement admitted that he has provided bogus long-term capital gain/short-term capital loss entry to the beneficiaries through M/s Comfort Securities Ltd. The AO further noted that out of 93 exit providers in the case of scrip of Splash Media, notices sent to 24 entities under section 133(6) of the Act were returned unserved with remarks unknown/left. Accordingly, the AO treated the share transaction by the assessee as bogus and added the entire sale consideration of Rs. 8,67,07,353, to the total income of the assessee as unexplained cash credit under section 68 of the Act. The AO further made an addition on account of commission @ 3% to obtain the pre-arranged bogus long-term capital gains, which comes to Rs. 24,55,549, under section 69C of the Act. 8. The learned CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid shareholding, the assessee during the year under consideration between 08/12/2010 and 29/03/2011 sold 12,35,000 equity shares at an average rate of Rs. 49.89, and earned long-term capital gains of Rs. 5,81,79,330. The aforesaid facts are not disputed by the Revenue. 10. On the basis of a countrywide investigation carried out by the Directorate of Investigation, Kolkata, wherein the organised racket of generating bogus entries of long-term capital gains, which is exempt from tax, was alleged to have been unearthed, price fluctuation of the scrips in which assessee has transacted, statement of the director of the aforesaid companies accepting the provision of bogus long term capital gains, the AO treated these companies as paper entities and disallowed the claim of exemption under section 10(38) of the Act on long-term capital gains earned by the assessee. The AO has referred to the value of shares at a different point in time including the period during which the assessee was holding the shares. However, from the perusal of the assessment order, it is evident that in the findings of the Directorate of Investigation, Kolkata, as inter-alia mentioned on pages 3, 21, and 43 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the beneficiaries are purchased by the dummy buyers. The transactions take place through the stock exchange and brokers and some nominal commission is charged in cash on the net pre-arranged bogus LTCG accruing to the beneficiary. This pre-arranged bogus Capital gain income so earned through rigging of shares is claimed as exempt in the books of the beneficiary. In the same price, book bogus Short term capital Loss by selling the shares when the prices fall. Q9 Please explain in detail about your role in providing bogus LTCG to the beneficiaries of the scrips Radford Global Limited, First Financial Services Limited and Rutron International Limited. Ans. Sir, I knew three persons, namely, Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain, of Mumbai, who are primarily involved in the business of providing entry of LTCG. I knew the directors of M/s Rutron International Limited and M/s First Financial Services limited and introduced them to Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain. I also came to know that M/s.Radford Global Limited is also one such penny stock company which was operated by Shri Paras Chaplot, Shri Pankaj Shah and Shri Vijay Jain. Some cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm capital gains has been provided to the beneficiaries of the scrips in which assessee has transacted, i.e., Comfort Intech Ltd and Splash Media. Therefore, even if it is assumed that Mr. Anil Agarwal was involved in rigging the price of certain scrips, no admission has been brought on record that he was involved in rigging the price of the scrips in which the assessee has transacted or the assessee is the beneficiary of such rigging. 13. Further, in para 9 on page 46 of the assessment order, the AO alleged that there are certain parties who have taken the name of the assessee, however, there are neither any findings nor any reproduction or reference to the statements of such person in the assessment order who alleged that assessee was beneficiary of the bogus long term capital gains or was involved in this racket. From the perusal of the assessee's submission dated 19/12/2017, filed before the AO, forming part of the paper book from pages 217-240, we find that the assessee specifically requested the AO to provide the details of the brokers who have given a statement that the assessee has taken accommodation entries in the form of bogus long-term capital gains. Further, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegedly involved in price rigging of shares. Therefore, in view of the above, we are unable to persuade ourselves to accept the conclusion reached by the Revenue on the basis of the findings recorded in the order passed by the lower authorities. Accordingly, we direct the AO to delete the impugned addition made under section 68 of the Act and accept the plea of the assessee in respect of long-term capital gains earned during the year. Since the main transaction has not been found to be bogus, the addition on account of commission @ 3% made by the AO and upheld by the learned CIT(A) is also deleted. As a result, grounds no.2-6, raised in assessee's appeal are allowed. 16. In view of our aforesaid findings ground no.7 is rendered academic and therefore needs no separate adjudication. 17. Ground no.8, raised in assessee's appeal, pertains to the levy of interest under sections 234B and 234C of the Act, which is consequential in nature. Therefore, ground no.8 is allowed for statistical purposes. 18. Ground no.9 pertains to the initiation of penalty proceedings, which is premature in nature and therefore is dismissed. 19. In the result, the appeal by the assessee is partly allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing. The Appellant prays your Honour to delete the additions/disallowances made by the Assessing Officer in the impugned order." 21. Grounds no.1 and 2, raised in assessee's appeal, challenging the reopening of assessment section 147 of the Act were not pressed during the hearing. Accordingly, the same are dismissed as not pressed. 22. The issue arising in grounds no.3-5, raised in assessee's appeal, is pertaining to the disallowance of exemption of long-term capital gains claimed under section 10(38) of the Act by treating the share transaction as non-genuine and making the addition under section 68 of the Act. 23. Similar to the assessment year 2011-12, this year the Revenue relied on similar material as was relied in the preceding assessment year to hold that short-term capital loss claimed as exempt by the assessee from the sale of shares in Comfort Intech Ltd is bogus. In this year also, the Revenue has failed to prove with any cogent evidence on record that the assessee was involved in converting its unaccounted money into short-term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Ltd. and there was no sale of these shares during the year under consideration. It is evident from the record that the information which is relied upon by the Revenue pertains to manipulation and rigging of the prices of the shares for claiming bogus long-term capital gains and short-term capital loss exemptions. Since the assessee has not sold any shares of M/s.Rutron International Ltd., the question of long-term capital gains/short-term capital loss does not arise. Further, it is evident from the record that the assessee in order to substantiate the purchase transaction submitted that the sale consideration was paid through normal banking channel and the shares are held in the Demat account. It is pertinent to note that only when the investment is not recorded in the books of accounts or the explanation by the assessee regarding the nature and source of the investment is found to be not satisfactory, the value of the investment can be treated as an unexplained investment under section 69 of the Act. However, in the present case, no such allegation has been raised by the Revenue. Thus the addition made by treating the purchase consideration as unexplained investment under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer in not granting Cost of purchase of shares of Rs. 7,00,000/- as deduction from LTC GAINS, as per the calculations submitted; 8. On the facts and circumstances of the Appellant's case and in law, Ld. CIT(A) erred in confirmation the action of the Assessing Officer in leaving Interest u/s 234B of Rs. 18,17,901/-; 9. On the facts and circumstances of the Appellant's case and in law, Ld. CIT(A) erred in confirmation the action of the Assessing Officer in issuing notice u/s 271(1)(c) of the Income Tax Act, 1961." 29. Ground no.1, raised in assessee's appeal, was not pressed during the hearing. Accordingly, the same is dismissed as not pressed. 30. The issue arising in grounds no.2-6, raised in assessee's appeal, is pertaining to the disallowance of exemption of long-term capital gains claimed under section 10(38) of the Act by treating the share transaction as non-genuine and making the addition under section 68 of the Act. 31. We have considered the submissions of both sides and perused the material available on record. The assessee was allotted 3,75,000 shares of M/s First Financial Services Ltd. for a total consideration of Rs. 75 lakh having a face val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the SEBI vide aforesaid Adjudication Order found various other entities, including Mr. Anil Agarwal, on whose statement the AO has placed reliance for treating the impugned transaction as bogus, to be involved in jacking up the price artificially of the scrip of M/s.First Financial Services Ltd. and accordingly found them to have violated the aforesaid SEBI Regulations and Act. Thus, it is evident that the transaction of the assessee in the scrips of M/s.First Financial Services Ltd. has been found to be not violative of the provisions of the relevant Act and Regulations by the SEBI upon necessary investigation and the assessee was held to be not involved in price rigging. Therefore, in view of the above, we find no basis in sustaining the impugned addition made by the AO by treating the said transaction to be for obtaining bogus long-term capital gains. Accordingly, we direct the AO to delete the impugned addition made under section 68 of the Act and accept the plea of the assessee in respect of long-term capital gains earned during the year. Since the main transaction has not been found to be bogus, the addition on account of commission @ 3% made by the AO and upheld by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gus share transaction, as per the grounds stated in the order or otherwise. 6. On the facts and circumstances of the Appellant's case and in law, Ld. CIT(A) erred in confirmation the action of the Assessing Officer in not granting deduction of L.T. CAPITAL GAINS U/S 10(38) of the Income Tax Act, 1961 of Rs. 80,22,789/-; 7. On the facts and circumstances of the Appellant's case and in law, Ld. CIT(A) erred in confirmation the action of the Assessing Officer in not granting Cost of purchase of shares of Rs. 28,31,000/- and other incidental charges of Rs. 3,71,285/- as deduction from L.T.C.GAINS, as per the calculations submitted; 8. On the facts and circumstances of the Appellant's case and in law, Ld. CIT(A) erred in confirmation the action of the Assessing Officer in leaving Interest u/s 234B of Rs. 16,92,315/-; 9. On the facts and circumstances of the Appellant's case and in law, Ld. CIT(A) erred in confirmation the action of the Assessing Officer in issuing notice u/s 271(1)(c) of the Income Tax Act, 1961." 38. In the appeal for the assessment year 2015-16, the assessee has raised the following grounds:- "The following grounds of appeal are without prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) erred in confirmation the action of the Assessing Officer in issuing notice u/s 271(1) of the Income Tax Act, 1961;" 39. Ground no.1, raised in both appeals, was not pressed during the hearing. Accordingly, the same is dismissed as not pressed. 40. In the assessment years 2014-15 and 2015-16, the AO disallowed the exemption of long-term capital gains claimed by the assessee under section 10(38) of the Act in respect of transactions in the scrips of M/s.First Financial Services Ltd. Since a similar addition has been deleted in assessee's appeal for the assessment year 2013-14, our findings/conclusions as rendered therein are applicable mutatis mutandis to the present appeals. Accordingly, we direct the AO to delete the impugned addition made under section 68 of the Act and accept the plea of the assessee in respect of long-term capital gains for the assessment years 2014-15 and 2015-16. Since the main transaction has not been found to be bogus, the addition on account of commission @ 3% made by the AO and upheld by the learned CIT(A) is also deleted in both appeals. 41. The issue pertaining to the levy of interest under sections 234B and 234C of the Act, in both appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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