TMI Blog2023 (10) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... has produced all the relevant evidence to establish that the transaction is genuine and assessee is eligible for claim u/s 10(38) We hold that the assessee has successfully proved the genuineness of the transaction of purchase and sale as well as holding of the shares which is also not disputed by the AO and therefore, in absence of any material brought on record to controvert these facts substantiated by the evidence produced by the assessee the claim of the assessee cannot be held as bogus - addition made by the AO on account of long term capital gain claimed as exempt u/s 10(38) of the Act and consequently, the disallowance of brokerage expenses is deleted. Decided in favour of assessee. - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER For the Assessee by Shri Hitesh Chimnani Yash Kukreja ARs For the Revenue by Shri Ashish Porwal, Sr. DR ORDER PER VIJAY PAL RAO, JM: These are three appeals filed by the related assesses (mother son) out of which two appeals are filed by the mother for assessment years 2014-15 2015-16 and one appeal by the son for assessment year 2015-16 arising from three separate orders of Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed by the assessee is an income from undisclosed source and made addition of the same along with brokerage expenses u/s 68 of the Act. The assessee challenged the action of the AO before Ld. CIT(A) but could not succeed. 3. Before the Tribunal the Ld. AR of the assessee has submitted that the assessee is regularly making purchase and sales of the shares and purchased 500 shares of M/s. Surabhi Chemicals Investments Ltd on 20.03.2012 for consideration of Rs. 62,500/- @ 125 per share. He has referred to the bill dated 20.03.2012 of M/s Aakrati Advisory Services Pvt. Ltd. at page no. 56 57 of the paper book as well as the bank account statement of the assessee at page no. 58 of the paper book and submitted that the purchase consideration was paid through banking channels vide cheque no. 767734 reflected in the bank account statement of the assessee. Thus, the Ld. AR has submitted that the assessee made the payment of purchase consideration through cheque and is not in dispute which established the date of purchase by the assessee thereafter the company M/s. Surabhi Chemicals Investments Ltd. announced bonus issued in the ratio of 9:1 and consequently assessee received 4500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court in case of CIT vs. Shayam R. Pawar 54 taxmann.com 108 and submitted that Hon ble High Court has held that primary onus of proof that the transaction is sham or bogus is on the department. The department in the case of the assessee has not discharged its primary onus and has merely alleged on the preponderance of probabilities that all the shares transactions related to the M/s. Surabhi Chemicals Investments Ltd. are bogus in nature. The AO in his order has stated that the company is not having any growth potential and is not having any business, therefore, the rise in the share prices is not real. The Ld. AR has submitted that prices of shares are depending on demand and supply of the shares between the market participants. The share price of this company increased because of a market information that the company is expecting a huge turnaround and is expected to get a huge government contract. Past information is not a basis of estimating the share prices but the future earning potential of the company is relevant. The AO has passed the assessment order without considering the evidence filed by the assessee. The ld. CIT(A) has confirmed the order of the AO without ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bros. vs Commissioner Of Income-Tax 37 ITR 271 wherein it has been held that suspicion which cannot take the place of proof in these matters. 7. On the other hand, Ld. DR has submitted that the shares of M/s Surabhi Chemicals Investments Ltd. were purchased by the assessee in physical form. In various investigation carried out by the department it was found that the shares of M/s Surabhi Chemicals Investments Ltd. have been used for providing accommodation bogus entries of capital gain by various brokers and other individuals. The SEBI conducted investigation in this regard and vide order date 30th September 2021 found that the broker M/s Aakrati Advisory Services Pvt. Ltd. was involved in rigging the share price of M/s Surabhi Chemicals Investments Ltd. Therefore, all these facts clearly show that the shares alleged purchased through M/s Aakrati Advisory Services Pvt. Ltd of M/s Surabhi Chemicals Investments Ltd. and subsequently, sale at a very unreasonable and high prices resulting a claim of huge long term capital gain exempt u/s 10(38) of the Act is not genuine transaction. The SEBI has discussed the modus oprendi of these persons of rigging share price of partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Surbhi Chemical Investments 5089 30.3.12 62500 17.9.13 219821 157321 17 month Surbhi Chemical Investments 7300 30.3.12 23.9.13 340831 340831 17 month Surbhi Chemical Investments 2613 30.3.12 25.10.13 148142 148142 18 month Surbhi Chemical Investments 9998 30.3.12 3.12.13 582749 582749 19 month Surbhi Chemical Investments 6100 30.3.12 23.12.13 353014 353014 20 month Total 31100 62500 1644557 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Therefore, the holding of the shares by the assessee as on 31.03.2012 and at least on 22nd June 2012 when the assessee filed the return of income cannot be dispute as evident from the record being return of income for the A.Y. 2012-13 and balance sheet. Further the assessee has made purchase consideration through account payee cheque which is duly reflected from the bank account statement of the assessee as well as the receipt issued by the broker giving the particulars of cheque no. amount and consideration against sale of shares. Similarly, the sale of shares are not in dispute as these are sold on the stock exchange and from the Demat account of the assessee. For the year under consideration the assessee has sold 31100 shares from 17th September 2013 to 23rd December 2013 after a holding period of 17 months to 20 months. The AO has considered the financial statements of the M/s Surabhi Chemicals Investments Ltd. and held that the profit and loss account of the company shown that this company has no business during the last five years and therefore, the market value of shares of the company at the stock exchange is unrealistic. It is pertinent to note that the market price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in position to manipulate price by create an artificial demand and shortage of supply. Ld. DR has referred to the order of the SEBI dated 30th September 2021 wherein certain brokers were suspended from the trading at the stock exchange because of their involvements in rigging the price of certain shares for the purpose of providing accommodation entries however, the transactions and fraudulent acts funds which were examined by the SEBI were for the period from 1st August 2012 to January 6, 2015 whereas in the case of the assessee the shares were purchased on 20.03.2012 which was prior to the said period which was investigated by the SEBI. Further there was neither any order against the broker through whom the assessee has purchased the shares as that relevant point of time nor any indictment by any of the agency. Thus, the assessee cannot be expected to be aware about the malpractice. When neither any material nor the facts and circumstances of the case remotely indicate or suggest that the assessee has any role or involvement in the alleged rigging of the price of the shares in question at stock exchange then the mere abnormal rise in the shares price in comparison to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of these shares but the said report cannot be the sole basis of holding the transactions as bogus. The AO has recorded the statement of the assessee and nothing incriminating is detected or resulted as per the outcome to the inquiry conducted by the AO. The assessee has recorded these transactions in the books of account and as per balance sheet as on 31.03.2012 these shares have been duly held by the assessee. The assessee produced each and every documentary evidence relating to the transaction of purchase and sale of these shares and the AO has not given even a remote remark about the genuineness of the documentary evidence filed by the assessee. Once the assessee has discharged its onus to show that the transaction of purchase and sale is a real and genuine transaction then the burden is shifted to AO to disprove the claim of the assessee by some tangible material brought on record. The AO has held these transactions as bogus only on the basis of suspicion and not on the basis of conclusive evidence whereas the assessee has produced all the relevant evidence to establish that the transaction is genuine and assessee is eligible for claim u/s 10(38) of the Act. In the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of purchase and sale as well as holding of the shares which is also not disputed by the AO and therefore, in absence of any material brought on record to controvert these facts substantiated by the evidence produced by the assessee the claim of the assessee cannot be held as bogus. Accordingly, we set aside the orders of the authorities below on this issue and addition made by the AO on account of long term capital gain claimed as exempt u/s 10(38) of the Act and consequently, the disallowance of brokerage expenses is deleted. ITA No. 216/Ind/2019 For A.Y. 2015-16 The assessee has raised following grounds of appeal: 1. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in maintaining addition of Rs. 17,76,008/- u/s 68 of the IT Act, 1961 towards alleged bogus long term capital gain when a. All the transactions stand duly established by contemporaneous, independent third party evidences which have not been disproved i.e. purchase and sale through SEBI registered brokers through Cheque, DMAT, and Bank A/C. b. Neither the Ld. AO nor the Ld. CIT(A) have established how their unilateral concocted theory of arranging bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law the Ld. CIT(A) erred in maintaining addition of Rs. 17,54,828/- u/s 68 of the IT Act, 1961 towards alleged bogus long term capital gain when a. All the transactions stand duly established by contemporaneous, independent third party evidences which have not been disproved i.e. purchase and sale through SEBI registered brokers through Cheque, DMAT, and Bank A/C. b. Neither the Ld. AO nor the Ld. CIT(A) have established how their unilateral concocted theory of arranging bogus long term capital gain applies to the assessee by any tangible evidence. The addition made by the Ld. AO has been sustained only on the basis of theory of human probabilities without any concrete basis or live link/involvement of assessee in their theory. c. The material unilaterally relied on by the Ld. AO Ld. CIT (A) has not been provided to the assessee despite specific repeated requests made at all stages. The order so passed is thus perverse being against the basic principles of natural justice and may very kindly be quashed. 2. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the above grounds during the hearing of the appeal. 18. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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