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TMI Blog2024 (1) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... said manipulation of prices of shares to the extent of Rs.. 1,10,80,500/-. Based on the above information the case of the assessee was reopened by issue of notice under section 148 of the Act on 29.03.2016 after proper approval. In response, Ld.AR of the assessee submitted a letter dated 06.04.2016 with the request to treat the original return filed in compliance with the notice under section 148 of the Act and asked for the copy of reasons recorded before issue of notices. The reasons were supplied to the assessee and statutory notice under section 143(2) of the Act were issued and served on the assessee. 3. Based on the information received from assessee, it was noticed that assessee bought 75000 shares of M/s. Rander Corporation Ltd.,@Rs..13/- per share and sold the same @147.37/- and declared the net gain of Rs.. 1,00,77,724/. The Assessing Officer observed that assessee earned Long Term Capital Gain during the year and claimed it as exempt under section 10(38) of the Act and he considered this transaction as suspicions because of huge claim of capital gains earned by the assessee. 4. By relying on the findings of the Kolkata Investigation Wing wherein they have analysed 84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements recorded by the various entry operators, brokers and exit operators, the Assessing Officer confirmed the addition by adding the sale proceeds of shares under section 68 of the Act to the extent of Rs.. 1,10,52,724/-. 7. Aggrieved assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions. After considering the submissions of the assessee, Ld. CIT(A) sustained the action of the Assessing Officer. 8. Aggrieved assessee is in appeal before us raising following grounds: - "1. The Ld. CIT erred in confirming the long term capital gain income of Rs. 1,10,52,724/- as income u/s 68 without appreciating to the fact that individual appellant had invested in stocks as all were against deliveries as reflected in his Balance sheet as investment and where all payments were against delivery taken. Changing the character of gain as income from Other Sources is bad-in-law and facts; therefore, the surplus arising may be treated as a LTCG u/s 10(38). 2. The appellant craves leave to add, amend, alter, drop any of the grounds of appeal." 9. At the time of hearing, Ld.AR of the assessee brought to our notice relevant facts of the case and with regard to addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that the revenue relied on the findings of the DIT(Inv), Mumbai that shares of M/s Rander Corporation Ltd. are traded on BSE under Security Code is 531228, the Assessing Officer considering the same as a mere bogus company and Shri Amar Chand Rander and Natwar Lal Daga are the operator of the Company. It was noticed that these companies were engaged in issuing bogus bills for providing long term capital gain/loss, speculation loss/profit etc., It was noticed by the Assessing Officer that the Assessee has purchased shares of M/s Rander Corporation Ltd., one of the group companies of Shri. Amar Chand Rander. On this basis the assessee's case was brought under assessment without any tangible material on record but on basis of information and statement of third party. 13. Ld.AR of the assessee brought to our notice facts and explanations in the chronological order of the transactions of long-term capital gain to establish the genuineness of the transaction, for the sake of clarity it is reproduced below: - "i. The appellant is an investor in securities for last several years and is still maintaining Demat Account with same broker M/s Ambient Securities Broking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Broking Pvt. Ltd.. xii. The Ld. AO is silent on the Shares Contract Notes of Demat Account in Appendix B to Regulation-14 of SEBI and has not consider important evidences issued by Third Party. xiii. The shares were sold through recognized stock exchange on which the appellant has paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house and the seller only receives sales consideration from the stock exchange through the share broker. Therefore, neither the seller was knowing the purchasers, nor the purchasers were knowing the seller. In absence of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing. Therefore, the appellant cannot be said to be a part of the group indulging into rigging of share prices of the scrips as alleged by the Ld. AO. xiv. During the course of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition are on page 24 of the detailed written submission. 14. Further, Ld.AR of the assessee submitted that addition made on basis of statement of third party Shri Amar Chand Rander which was thereafter retracted cannot be made the basis for addition. In this regard, he submitted that, Assessee denies to know any person named Shri Natwar Lal Daga as mentioned in the assessment order. Further, the Assessee has no privy of contract with the buyer or so-called Shri Natwar Lal Daga as the assessee has sold shares at the online platform of the recognised stock exchange clearing house through his share broker. He submitted that when a person places his order for sale or purchase of any share on the online platform of the stock exchange, the identity of seller is not known to buyer and vice versa. The Online platform only shows the top offer rate & quantities and bidder rate & quantities of the particular scrip/shares. No other details of buyer or seller or even the brokers of buyer or seller is reflected on the screen. The seller of shares never knows who the ultimate buyer is and the buyer does not know who the ultimate seller is of scrip/shares. Further all the fund and shares deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shares or securities with short-term/Long-term perspective, his objectives shall always be to sell the shares in short term and offload when he realizes the best price as per his strategy. Such transactions of deriving short-term/long-term capital gain cannot be a regular trend and it cannot be questioned just because there is substantial gain in any particular scrip or year. 17. Ld.AR of the assessee submitted that, the action of the Assessing Officer for making such addition on the basis of the statement of third person is not lawful and justified as under: - "i. The statement of so called Shri Amar Chand Rander was not provided to the Appellant during the course of assessment. ii. Nothing has been brought on record which could establish that the Appellant was the beneficiaries of so called accommodation entries provided by the so called Shri Natwar Lal Daga (third person). whether the so called modus operandi iii. Nothing has been brought on record employed for manipulation/rigging of the price of the shares by so called Shri Amar Chand Rander also existed in the Appellants case. iv. No Opportunity was provided to the Appellant to cross examine the so called Shri A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge No. 11 of the Ld. CIT(A) order and brought to our notice Ld. CIT(A)'s findings. In support of the above findings of lower authorities, he relied on the decision of Coordinate Bench in the case of Naresh Manakchand Jain v. ACIT in ITA No. 1945 & 1946/MUM/2023 dated 31.08.2023. Ld. DR filed its written submissions vide letter dated 11.10.2023 objecting to the submissions of the Ld. AR, for the sake of clarity it is reproduced below: - "Kindly refer to the above. In addition to the order of AO and CIT(A) following summary points of oral arguments during the hearing are submitted in this case. Sequence of submission is- Facts of the case, issue in dispute, summary of argument of the Assessee and its rebuttal, case laws 1. Facts of Bogus LTCG- i) Rs 13 share was sold at Rs 147 ii) Script of M/s Rander didn't have underlying financial or business transaction to support this rise in normal course ii) Rigging was followed by offloading of shares. Assessee offloaded in the same way. iv) Total scam was of 438 crores v) MD of M/s Rander participated in the scam as he got Rs 7 crores vi) Mr Daga, Kedia, Khandaria coordinated the conspiracy. Share brokers clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re either on distinguishable facts or did not consider the important issue hence per-incuriam or sub silentio silence without any consideration to principles u/s 68 or are not the laid principle laid down ie obiter dicta and not ratio-decidendi Sr. No. Name Distinguish/Per Incuriam / sub silentio / obiter dicta 1. Dipesh Varshan vs DCIT ITA 7648/mum/2019 Did not considered whole scheme as a fraud and conspiracy, (sub silentio). Evidences of scam ie bank statement, DMAT a/c, contract note, ledger were considered as in favour of assessee when they were the very documents explaining modus operendi of the fraud, (per- incuriam) 2 Anraj shah HUF v ITO 4514/mum/2018 Did not considered whole scheme as a fraud and conspiracy. (sub silentio) Evidences of scam ie bank statement, DMAT a/c, contract note, ledger were considered as in favour of assessee when they were the very documents explaining modus operendi of the fraud. (per-incuriam). 3 Rameshchandra kothari v ACIT ITAT 649/bang/2019 Set aside to AO. Issue was about providing statements to the assessee. In the case of Assessee, AO gave all the statements and mentioned in the order. (Distinguish) 4 Arun Tripathi V PCIT 2560 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in case of Suman Dayal v DCIT(1995]214ITR 801 (SC) and in case of CIT v Durga Parasad 82 ITR 540 (SC). Furthermore, on similar facts of LTCG scam, tax liability was imposed in following cases. Udit Kalra v. ITO [IT Appeal No. 220/2019(Delhi HC), Sanjay Bimalchand Jain v. Pr. CIT [2018] 89 taxmann.com 196 (Bom.); Sanat Kumar v. Asstt. CIT [IT Appeal No. 1881 (Delhi) of 2018, dated 6-6-2019] Pooja Ajmani v. ITO [2019] 106 taxmann.com 65/177 ITD 127 (Delhi - Trib.) Anip Rastogi v. ITO [IT Appeal No. 3809 (Delhi) of 2018, dated 8-1-2019] Abhimanyu Soin v. ACIT [IT Appeal No. 951 (CHD) of 2016, dated 18-4-2016] Smt. M.K. Rajeshwari v. ITO [2018] 99 taxmann.com 339 (Bang. - Trib.) Chandan Gupta v. CIT [2015] 54 taxmann.com 10/229 Taxman 173 (Punj. &Har.) 5. In view of the above, appeal filed by the assessee may be dismissed." 20. In the rejoinder Ld.AR of the assessee submitted that assessee is a regular investor and he brought to our notice Page No. 10 of the Paper Book wherein assessee has made several investments and he brought to our notice list of investments made by the assessee. With regard to reliance of Ld. DR in the case of Naresh Manakchand Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit and Capital Ltd. The shares of M/s Parag Shilpa Investments Ltd were purchased via a preferential allotment basis, while the assessee has placed on record the contract notes for the purchase of shares of M/s Ashika Credit and Capital Ltd. From the sale of shares of M/s Parag Shilpa Investments Ltd, the assessee earned long-term capital gains, which was claimed as exempt under section 10(38) of the Act. While from the sale of shares of M/s Ashika Credit and Capital Ltd, the assessee earned short-term capital gains. On the basis that the aforesaid companies were part of the investigation by the Directorate of Income Tax (Investigation), Kolkata, Mumbai, and Ahmedabad, and certain investors as well as entry operators have earned bogus long-term capital gains from transacting in shares of the aforesaid companies, the AO treated these companies as paper entities and disallowed the claim of exemption under section 10(38) on account of long term capital gains and a lower rate of tax on short-term capital gains earned by the assessee. The AO also referred to the value of the shares at a different point in time including the period during which the assessee was holding the shares. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in price rigging of shares artificially of the aforesaid companies. Therefore, in view of the above, we are unable to persuade ourselves to accept the conclusion reached by the Revenue on the basis of findings recorded in the orders 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 the long-term capital gains and short-term capital gains earned during the year. As a result, the grounds raised by the assessee are allowed." 22. Respectfully following the above case, only difference is the script is different, however, the assessee has no saying on the script traded by him and there is no relationship established with the accommodation entry providers anywhere on the record. Further the assessee himself a regular investor and not linked to any other suspected transactions. Merely because he has dealt with one of the suspected scripts, we cannot take adverse view without actually bring any material on record. 23. Further, we observe that Ld DR heavily relied on the decision of coordinate bench in the case of Naresh Manakchand Jain (ITA No 1945 and 1946 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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