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TMI Blog2023 (12) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in deleting the addition of Rs. 9,67,73,500/- on account of bogus/non-genuine Capital Gain by sale of shares of Penny stock Company i.e. M/s Global Infratech Finance Ltd. erstwhile M/s Asianlak Capital and Finance Ltd., by not appreciating the fact involved in this case that the said company had almost no trading in shares for the past many years and the assessee himself failed to explain the basis of making investment in such penny stock company. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs. 9,67,73,500/- on account of bogus/non-genuine Capital Gain by sale of shares of Penny stock Company i.e. M/s Global Infratech Pvt. Ltd. erstwhile M/s Asianlak Capital and Finance Ltd., by not appreciating that the share price of the said company was rigged almost 100 times in span of 1 year (197 trading). This fact also substantiate that the said company was a penny stock company. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs. 9,67,73,500/- on account of bogus/non-genuine Capital Gain by sale of shares of Penny stock Company i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.12.2012 and the assessee received 17,50,000 shares. During the year under consideration, the assessee sold 15,33,500 shares of M/s Global Infratech Finance Ltd. The Assessing Officer observed that the price of the company rose from Rs. 7.99 to Rs. 57.20 in 80 trading days only during the period 25.06.2012 to 12.12.2012 and on splitting of the shares in the ratio of 1:10, the market price fell to Rs. 5.80 on 13.12.2012 and again rose to Rs. 75.85 on 05.06.2013 in 117 trading days. The huge price rise and returns on investment provided by M/s Global Infratech Finance Ltd. was without any financial basis and was manipulated to just to provide bogus long-term capital gains entries to various beneficiaries. The statements of Shri Raj Kumar Kedia, an accommodation entry provider at Delhi, Shri Subrata Halder, a close associate of an accommodation entry provided and a Shri Manoj and Shri Anup Kumar Maheshwari (both share brokers) were recorded on various dates, who admitted involvement in the business of providing accommodation entries on long-term capital gains by using the listed company M/s Global Infratech Finance Ltd. During the course of survey, statement of the assessee was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal of the assessee, Ld. CIT(Appeals) made the following observations: "5.4 I have diligently considered the facts of the case, observations of the AO and submissions of the appellant. The AO has made addition of Rs. 9,44,73,250/- u/s 68 of the I.T. Act being gain on sale of shares of M/s. Global Infratech Finance Limited on the ground that sales and purchases of these shares were not genuine. I find that the appellant had not purchased the shares but he had been allotted shares of M/s. Asianlak Capital & Finance Limited on application made by him on 27/12/2011 with payment of application money by cheque number 318603 of HDFC Bank and the shares were allotted on such application in terms of Board's Resolution dated 19/01/2012. The share certificates were also issued to the appellant and those shares were in lock in period till 18/01/2013. \The copies of documents like share application, Board Resolution,' Shares certificate No: 0025287 with Distinctive numbers from 11320301 to 11495300 were furnished to the AO by the appellant along with his letter dated 10/10/2016. I also find from the copy of bank account of the appellant with the HDFC Bank that cheque number 3186 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary evidences of allotment of shares and payment thereof by cheque which is duly cleared long back in earlier year within two days, its dematerialisation in earlier year, holding of shares in said DEM AT account in earlier year and sale thereof on the floor of the Stock Exchange at the then prevailing price go to prove that as far as the appellant is concerned, the transactions cannot be held to be non-genuine. The AO has not contradicted these documentary evidences by bringing any clinching and cogent evidences that still, the transactions are bogus. It is pertinent as pointed out that shares of M/s. Global Infratech Finance were still quoted in the Stock Exchange. The AO has made observations based on general modus operandi adopted by entry operators, prudence of investment, abnormal rise in prices and the statements of some of such entry operators which, in my opinion, do not lead to the conclusion that the transactions of acquisition and sale of shares by the appellant are also non-genuine particularly in the wake of the above uncontroverted documentary evidences furnished by the appellant to him. 5.5 I am inclined to agree with the appellant that when the acquisition of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the appellant on sale of some of the shares of Global Infratech Finance Limited is genuine and not bogus. Consequently, the exemption claimed under section 10(38) is allowable to him as claimed and addition of Rs. 9,44,73,250/- by invoking provisions of section 68 is not justified." 5. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) deleting the additions made by the Assessing Officer. Before us, the Ld. DR submitted that in the instant facts, there is no dispute that the company in which investment has been made by the assessee i.e. M/s Global Infratech Finance Ltd. does not have any financial standing so as to justify such a steep rise in the price of the aforesaid stock. Further, based on the applications received, the aforesaid company had passed resolution at the meeting of the Board of Directors on 19.01.2012 allotting 1,05,05,000/- equity shares to 49 persons from non-promoter group on preferential basis. Subsequently, the company allotted 1,75,000 shares to the assessee in physical form and subsequently on 19.11.2012, assessee applied for dematerialisation of the securities and same were dematerialised on 14.12.2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the counsel for the assessee also drew our attention to the fact that the assessee during the impugned year under consideration was holding total of 85 shares including shares of other listed companies as well. Therefore, it is not a case where the assessee had made sole investment in this particular share so as to come to the conclusion/draw an inference that the assessee had made investment in this share so as to earn bogus long-term capital gains. The assessee had invested in this share on the advice of his father, and this fact has also not been disputed by the Department. Further, the counsel for the assessee also drew our attention to three judicial precedents, which pertained to the very same script i.e. M/s Global Infratech & Finance Ltd and have held that the assessee has not been engaged in earning bogus long-term capital gains on sale of such scrip. Further, the counsel for the assessee also placed reliance on various judicial precedents, which have held that in absence of any concrete evidence that the assessee was specifically engaged in price rigging and that the aforesaid transaction was entered only with a view to earn bogus long-term capital gains or that inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere artificially rigged to benefit share holders through bogus claim of long term capital gain. The assessee had purchased shares of the company for Rs. 1 lakh and when the investments in shares became eligible for long term capital gain it was sold for Rs. 29 lakhs during the period when the general market trend was recessive. The AO opined that the shares of the company X matched all the features of the companies which were provided bogus long term capital gain and made addition under Section 68 of the Act by treating long term capital gain as unaccounted income on the ground that the assessee invested in shares of company X to convert unaccounted cash under the guise of long term capital gain. When the matter was taken by the Revenue before the Hon'ble Calcutta High Court it held that it has been established by the Revenue that the rise of prices of the shares was artificially done by adopting manipulative practices. Consequently, whatever resultant profit accrued from out of such manipulative practices, same were also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee had reape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as to why shares of this company, having no sound financial basis, would increase by almost 100 times in a span of one year in 197 trading days only. Further, the assessee has also admitted that he was aware of the fact that investment which is making is in a company having no financial standing. However, we also need to be mindful of other facts surrounding the case. It may be noted that Department has brought nothing on record to prove that the assessee was involved in price rigging of the instant share or that any form of cash had flown back to the assessee, so as to create the instant gains made by the assessee as bogus long-term capital gains. Further, in the instant facts, the assessee was not provided any opportunity of cross examination, which is an absolute necessity when such substantial addition amounting to Rs. 9,44,73,250/- is made to the income of the assessee by placing reliance on the statement of third parties. In the case of Andaman Timber Industries 62 taxmann.com 3 (SC), the Hon'ble Supreme Court held that when statements of witnesses are made basis of demand, not allowing assessee to cross-examine witnesses is a serious flaw which makes order nul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:- "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee." 3. Thus, the Tribunal has record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gging and not has the case of assessee mentioned in the list of beneficiaries, by the persons whose statements were recorded. In the statements recorded, the name of the assessee as a beneficiary was not specifically mentioned this fact was also specifically taken noted by Hon'ble Supreme Court in the case of Renu Aggarwal (supra). The Ld. Assessing Officer has not brought any material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money. In the present case, despite the assessee's specific request, no opportunity of cross examination was provided to the assessee on the basis of whose statements reliance has been placed to hold that the sale of shares was sham / bogus. Further, the ITAT Kolkata and ITAT Mumbai with respect to the very same stock i.e. M/s Global Infratech and Finance Ltd. in three separate judgments (Mukesh Sharma in ITA Number 6249/Mum/2018, Kaushalya Agarwal 194/Kol/2018 and Mangilal Jain 729/Kol/2018) have decided the issue in favour of the assessee by holding that the assessee was not engaged in bogus purchase and sale of shares. 14. Accordingly, looking into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration on pro rata basis as against Rs. 13,26,641/- added by the Assessing Officer. 18. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). During the course of hearing, the Ld. DR placed reliance on the observations made by the Assessing Officer. 19. On going to the facts of the case, we observe that Ld. CIT(Appeals) has given a detailed basis of partially allowing the appeal of the assessee, and, the Ld. DR has not pointed out to any specific infirmity/factual inaccuracy in the observations made by Ld. CIT(Appeals) in the appellate order. Accordingly, looking into the facts of the instant case, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in partly allowing the appeal of the assessee, after taking into consideration the facts of the case. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference. 20. In the result, Ground No. 4 of the Department's appeal is dismissed. 21. Ground Nos. 5 and 6 of the Department's appeal are general in nature and do not require any specific adjudication. 22. In the result, the appeal of the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, in light of our observations for Assessment Year 2014-15, Ground Nos. 1 to 4 of the Department's appeal are dismissed. Ground numbers 5 and 6 of the Department's appeal are general in nature and do not require any specific adjudication. 25. In the result, the Department's appeal is dismissed for Assessment Year 2015-16. ITA No. 1662/Ahd/2019 (A.Y. 2016-17):- 26. The Department has raised the following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in restricting the unaccounted expenses of Rs. 4,04.28,562/- (for A.Y. 2009-10 to 2016-17) to Rs. 1,03,57,436/without appreciating that the assessee failed to submit any documentary evidence, proving contrary to the evidences recorded in the seized material. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 2,52,81,900/- made on account of unexplained expenditure without appreciating that the assessee failed to submit any justification with documentary evidence. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 56,32 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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