TMI Blog2023 (12) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... n cannot be applied. Further, in the case of Pr. CIT vs. Mehndipur Balaji [ 2022 (7) TMI 294 - ALLAHABAD HIGH COURT] relied on by the Ld. DR, the addition for the bogus LTCG received by the assessee were made on the basis of the incriminating material available on record. However, in the instant case, no such incriminating material along with corroborative evidence has brought on record to say that the assessee has involved in manipulation of the stock prices to earn bogus LTCG. It is also noted that the assessee has sold the shares through recognized Stock Exchange and hence he is not aware of the company of the buyers and therefore the arguments of the Ld. DR are not accepted - thus we find that the assessee has not involved in manipulation of stock prices for the purpose of earning bogus LTCG and hence we are inclined to allow the ground raised by the assessee. Treatment of commission expenditure as unexplained expenditure u/s 69C - Since the LTCG earned by the assessee are bonafide in nature, the commission expenditure shall be allowed as a deduction from the LTCG and hence this ground raised by the assessee is allowed. - Shri Duvvuru Rl Reddy, Hon ble Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return filed in response to the notice u/s. 153A of the Act. Electronically the assessee submitted a copy of the acknowledgement in token of the return of income filed u/s. 153A electronically on 23/11/2016. The assessee has admitted the same income as filed u/s. 139 of the Act. Subsequently, a notice u/s. 143(2), dated 19/06/2017 was issued and served on the assessee on 20/06/2017. In response, the assessee s Representative appeared and furnished the computation of income. The Ld. AO subsequently issued a notice u/s. 142(1) of the Act and served on the assessee on 11/8/2017 along with the detailed questionnaire. The Ld. Assessee s Representative submitted the financial statements, evidences in support of deduction claimed u/s. 80C and details of shares held and copies of demat accounts etc., before the Ld. AO. The Ld. AO on 30/10/2017 issued a show cause notice seeking explanation from the assessee as to why the exemption claimed u/s 10(38) of the Act, on the LTCG from the sale of equity shares should not be denied. The Ld. AO on perusal of the return of income noticed that the assessee was in receipt of LTCG of Rs. 4,75,65,374/- from the sale of equity shares of M/s. Global Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manipulation of the stock prices. Considering these submissions of the Assessee s Representative, the Ld. AO considered that the LTCG declared by the assessee are not genuine. The Ld. AO further observed that the assessee has involved in dealing with penny stocks and thereby treated the LTCG as unexplained cash credit u/s. 68 r.w.s 115BBE of the Act. Consequently, since the exemption relating to LTCG was considered as non-genuine by the Ld. AO, the Ld. AO also treated the commission of Rs. 28,03,781/- as unexplained expenditure u/s. 69C r.w.s 115BBE of the Act. Aggrieved by the additions made by the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). 4. During the First Appellate proceedings, the Ld. AR of the assessee appeared and furnished the relevant information before the Ld. CIT (A). The Ld. CIT(A) considering the submissions of the assessee and the facts and circumstances of the case and relying on various judicial pronouncements, upheld the order of the Ld. AO thereby dismissing the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before the Tribunal by raising by raising following Grounds of Appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in M/s. Global Infratech Finance Limited in the normal course of investment. The Ld. AR reiterated that the transactions were made through the recognized Stock Exchange and the sale consideration was received through banking channels. The Ld. AR further submitted that the shares were dematerialized through the registered Stock Broker M/s. Ashika Stock Broking Ltd., Visakhapatnam and the assessee has also paid Securities Transaction Tax (STT) on the sale of shares. It was further submitted by the Ld. AR that during the proceedings no material was seized with respect to back to back cash transaction for the sale consideration received by the assessee. It was further submitted by the Ld. AR that the Ld. AO has not brought in any corroborative evidence to implicate the assessee being in collusion with the commission entry providers. The Ld. AR further submitted that the Hon ble Securities Appellate Tribunal, Mumbai has found that the assessees were not involved into the alleged scheme of manipulating the price of M/s. Global Infratech Finance Limited. The Ld. AR submitted the order of the Hon ble Securities Appellate Tribunal before the Bench for its perusal wherein the assessees w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the statement as extracted at Page No. 26 of the AO s order wherein the commission was stated as 5.75%. The Ld. DR heavily relied on the following cases. 1. Judgment of the Hon ble High Court of Allahabad in the case of Pr. CIT vs. Mehndipur Balaji reported in [2022] 447 ITR 517 (Allahabad. 2. Judgment of the Hon ble High Court of Bombay in the case of Sanjay Bimalchand Jain vs. Pr. CIT reported in [2018] 89 taxmann.com 196 (Bombay) 3. Judgment of the Hon ble High Court of Calcutta in the case of Pr. CIT vs. Smt,. Usha Devi Modi reported in [2023] 151 taxmann.com 119 (Calcutta) The Ld. DR specifically drew our attention to the decision of the Hon ble Allahabad Bench in the case of Pr. CIT vs. Mehndipur Balaji reported in [2023] 447 ITR 517 (Allahabad) (supra) wherein the name of the share broker Sri Soumen Sen was implicated to manipulate the share prices by providing accommodation entries. He then referred to the order of the Ld. AO in Page No.22 of the order of the Ld. AO wherein the statement from Sri Soumen Sen u/s. 131 of the IT Act, 1961 was recorded under the survey operations. The Ld. DR therefore submitted that the exit promoters have orchestrated w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they were connected to each other and that Noticee no. 45 is the director in M/s. ATR Ware Housing Pvt. Ltd. which had fund transaction with the Company Noticee no. 8 and therefore Noticee nos. 45 and 46 are connected to the Company and thereby connected to the entities involved in price manipulation i.e. Noticee nos. 1 to 7. Based on the aforesaid connection the WTM has come to the conclusion that the appellants were involved in the price manipulation in the scrip of the Company and sold the shares at inflated price. 11. In our opinion this finding is patently perverse. Ample evidence has been filed by the appellants to show that the fund transaction with Global was a business transaction in the usual course of business and had nothing to do with the purchase of the preferential allotment of shares or with the price manipulation. The WTM has acknowledged that there is no allegation in the show cause notice against the appellants alleging that the funds received from the Company was utilized for allotment of preferential shares. 12. We find that there is evidence to the effect that the loan was taken in the normal course of business and the same has been duly repaid w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and is quashed. For the same reason the order of the AO also cannot be sustained and is quashed. All the appeals are allowed with no order as to costs. Further, the decision of the Hon ble High Court of Calcutta in the case of Pr. CIT vs. Smt. Usha Devi Modi reported in [2023] 151 taxmann.com 119 (Calcutta) (supra) relied on by the Ld. DR, it is distinguishable on the facts that the assessee has not proved the genuineness of the claim and creditworthiness of the companies in which investments were made. In the instant case, since the transactions were through proper banking channels, this case is of no help to the Revenue. Similarly, the decision of the Hon ble Bombay High Court in the case of Sanjay Bimalchand Jain vs. Pr. CIT-1, Nagpur reported in [2018] 89 taxmann.com 196 (Bombay) (supra) it is distinguishable on the fact that the details of persons who purchased the shares were not provided. In the instant case, the details of buyers are very much available in the order of the Ld. AO and hence this decision cannot be applied. Further, in the case of Pr. CIT vs. Mehndipur Balaji [2022] 447 ITR 517 (Allahabad) (supra), relied on by the Ld. DR, the addition for the bogus LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The Ld. CIT(A) has erred in law and on facts by holding the sum of Rs. 7,80,46,200/- earned by the assessee as unexplained cash credit u/s. 68 of the Act. The Ld. CIT(A) has erred in holding that the transactions in shares are bogus in nature and are a sham. The Ld. CIT(A) has not appreciated the facts and circumstances of the case, wherein the appellant has entered into these transactions in a bonafide and genuine manner. Treatment of commission expenditure as unexplained expenditure under section 69C of the Act. The Ld. CIT(A) has erred in law and on facts by holding that the sum of Rs. 44,87,686/- as unaccounted expenditure u/s. 69C of the Act. The Ld. CIT(A) has erred on facts in holding that the said expenditure is unexplained by incorrectly holding that the transactions due to which such expenditure has arisen, are bogus in nature. The Ld. CIT(A) has not appreciated the facts and circumstances of the case, wherein the appellant has entered into these transactions in a bonafide and genuine manner. 12. The assessee has raised the above grounds which are identical to that of the grounds raised by the assessee in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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