9911796707
TMI Blog2024 (5) TMI 1454X X X X Extracts X X X X X X X X Extracts X X X X ..... es and purchase of shares/securities. Thereafter, the case of the assessee was selected for scrutiny as per the CBDT guidelines following a survey u/s. 133A of the Act conducted on the assessee. Statutory notices were duly issued and served upon the assessee. It is pertinent to state that the return of income filed by the assessee was processed u/s. 143(1) of the Act. During the assessment proceedings, the AO called upon the assessee to furnish various information/details qua the long term capital gain on sale of flat at Chandra Mahal, Burdwan Road, Kolkata and also the details of short term capital loss of sale of equity shares amounting to Rs.1,87,25,176/-. The AO observed that the loss on short term capital loss of Rs.1,87,25,176/- from dealing in shares of M/s. Tuni Textiles Ltd. and M/s. Blue Circle Services Limited was not genuine but rather accommodation entries and intended to set off against the Long term capital gain accrued upon sale of flat as stated hereinabove. The assessee furnished before the AO the details of dealings in shares of M/s. Tuni Textiles Ltd. and M/s. Blue Circle Services Limited by submitting that these transactions were carried out through a SEBI regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of M/s. Tuni Textiles Ltd. and M/s. Blue Circle Services Limited was allowed in favour of the assessee. The Ld. AR, therefore, submitted that the issue is squarely covered in favour of the assessee. In the similar facts the Ld. AR also relied on series of decisions as under: 1. Pr. CIT v. Smt. Renu Aggarwal 456 ITR 249 (SC) 2. Pr. CIT vs. Indravadan Jain (HUF), ITA No. 454 of 2018, dated 12.07.2023 (Bom.) 3. ITO vs. Indravadan Jain (HUF), ITA No. 4861 & 5168/Mum/2014, dt. 27.05.2016. 4. Pr. CIT v, Smt. Renu Aggarwal ITA 44 of 2022 dt. 06.07.2022 (All.) 5. ITO Vs. Smt. Renu Aggarwal, ITA Nos.: 204 & 20S/LKW /2020 (ITAT Luck) 6. PCIT vs. Dipansu Mahapatra 149 taxmann.com 99 (Orr.) 7. M/s. Gateway Financial Services Ltd. vs. ACIT, ITA No. : 982/K/2018 M/s. Nishit Agarwal beneficiary Trust vs. ACIT ITA No. : 983/K/2018 Pinky Agarwal vs. ACIT ITA No. : 984/K/2018 Pratik Agarwal Beneficiary Trust vs. ACIT ITA No. : 2068/K/2018 8. Raigarh Jute & Textile Mills Ltd. ITA No. 2286/K/2019 dt. 27.06.2023 (ITAT, Kol) 9. Samrat Finvestors Pvt. Ltd. Vs. ITO, ITA No. 840/Kol/2023 dated 11.01.2024 (ITAT Kol) 10. Vicky Fincon Pvt. Ltd., ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares was adjusted against the LTCG accrued from sale of fixed asset i.e flat. We have perused the above decision carefully and observed that the facts are quite similar and also that the decision in the case of Gateway Financial Services Ltd. (supra) has been followed by the Coordinate Bench. We also note that the decision in the case of Nalanda Builders Pvt. Ltd. as relied upon by the Ld. AR has considered the decision of the Coordinate Bench in the case of Gateway Financial Services Ltd. (supra) which has distinguished the decision of the Hon'ble High Court in the case of Swati Bajaj(supra). The operative part of the decision in the case of Nalanda Builders Pvt. Ltd. (supra) is extracted below: "13. We have also perused carefully the facts of the decisions passed by the Coordinate Benches in the case of Gateway Financial Services Ltd. (supra) and Raigarh Jute & Textile Mills Pvt. Ltd. (supra) and find that the facts of the assessee's case are substantially similar to that in the above cases as decided by the Coordinate Benches. We also note that the decision of the Hon'ble Jurisdictional High Court in the case Swati Bajaj & Ors. (supra), relied upon by the ld. D/R, has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirms that Sri Amit Singh was the Proprietor of M/s SS Enterprises which is controlled and managed by him have purchased 2,69,870 shares of Radford Global through Calcutta Stock Exchange which were sold by Pratik Agarwal Beneficiary Trust, Praveen Agarwal HUF, Pinky Agarwal and Nishit Agarwal Beneficiary Trust of approx. Rs.2,19,10,234/- through their sellerbroker M/s. Gateway Financial Services Pvt. Ltd resulting in facilitation of pre-arranged accommodation entry of LTCG to them. This evidence was utilised by the Assessing Officer in treating their Long Term Capital Gains from transaction in shares of Radford Global Ltd as bogus and making addition u/s 68 of the Act. 22. Regarding the report of SEBI report dated 19.12.2014 we find that the said order was revoked by SEBI by the final order dated 20.09.2017 in SEBI/WTM/MPB/EFD-1-DRA-III/ 30 /2017 by observing as under: "Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adia & Anr., AIR 2008 SC 876, while considering a case under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, held that though the statute may not provide for cross- examination, the same being a part of Principles of Natural Justice should be held to be an indefeasible right. It was held as follows: "If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right" 27. In the case of Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100 Hon'ble Supreme Court observed that "effective cross-examination could have been done as regards the correctness or otherwise of the report, if the contents of them were proved. The principles analogous to the provisions of the Indian Evidence Act as also the principles of natural justice demand that the maker of the report should be examined, save and except in cases where the facts are admitted or the witnesses are not available for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer, though not bound to rely on evidence produced by the assessee as he considers to be false, yet if he proposes to make an estimate in disregard of that evidence, he should in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it." It was held in that case that "In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the statements were recorded much before the date of the survey conducted on the Assessee. It was unable to be disputed by the Department that the Assessee did not have an opportunity to challenge such statements and further, no opportunity to cross-examine the so-called entry providers was given to the Assessees. 7. Having heard learned Senior Standing Counsel for the Department (Appellant) and having perused the impugned orders of the AO, CIT(A) and the ITAT, the Court finds that both the grounds viz., the claim for benefit of section 10(38) of the Act and denial of an opportunity to cross examine the entry providers, turned on facts. The ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO." Therefore the Assessing Officer was bound to supply those statements and allow the cross examination of the maker of the statements to the assessee according to the judgement of the Hon'ble Calcutta High Court in Swati Bajaj (supra) case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these transactions as bogus or accommodation in nature. No such exercises have been carried out at any stage by the Revenue authority. Though the assessee has placed material on record to show that on merits also the case of the assessee is strong and the alleged transactions have been carried out through banking channel as well as through recognised stock exchange and demat accounts and also it has been claimed that in one case there is a loss and there is no addition u/s 68 of the Act but without going into the merits of the case even on legal ground itself, we, in view settled judicial procedure referred hereinabove, are inclined to hold that there is a violation of principles of natural justice as opportunity of cross-examination of all those persons whose statements though not directly referred to the alleged transactions but the statements having been used by ld. AO to make additions in the hands of the assessee(s) in appeal before us, was not provided to the assessee(s) even though requested during the course of hearing before the AO well as ld. CIT(A). Based on these facts, we find merit in the contention of the ld. Counsel for the assessee that principles of natural justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed by the revenue authorities. The assessee in this case has purchased 5232616 equity shares. The ld. AO has also referred to the equity shares price chart of Blue Circle Services Ltd., wherein there is a steep upward trend from 2011-12 onwards then a downward trend which goes up to the end of 2013 and again there is an increase in trend during 2013-14 but not to that extent of the past trend of steep increase. The claim of the assessee is that, looking at the trend of equity share, in the anticipation of earning good profits it made the investment in equity shares of Blue Circle Services Ltd., and there was some increase in the price but subsequently it started decreasing and since the assessee did not want to lose all its capital it sold the equity shares as and when it got the opportunity. Even though, the transactions have been carried out on the recognised stock exchange and well within the rules and regulations provided by the SEBI, we note that in all the alleged statements of the alleged third parties and the report of the investigation Wing there is specifically no indication that whether the assessee was directly involved with the promoters/directors of Blue Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. Thereafter the hon'ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. "11. The principles which emerge where sums of money are credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness logic of any business enterprises dealing with share transactions. Even brokers who coordinated transactions were also unknown to assessee. All these facts give credence to unreliability of entire transaction of shares giving rise to such capital gains ratio. That the Assessing officer was justified in making the additions on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities. 10. Now, we have to examine the contentions of the assessee in the light of the ratio of law laid down by the hon'ble Supreme Court in the case of "NRA steels" ( Supra ) and by the Calcutta High Court in the case of "Swati Bajaj"(supra). 10.1 The plea of the assessee in this case is that the assessee was bona fide purchaser of the shares in question. That the assessee had duly taken note of the financials and share price movement of the companies before purchasing the shares. The ld. counsel in this respect has referred to the financials of the said companies, the market trend and the reasons to exit as mentioned in the written submissions as reproduced above. firstly referred to the financial details and share price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in anticipation of the expected price action that usually follows in such stocks showing a reversal in dividend payout trend. That the shares of Comfort (still Comfort Fincap Ltd 535267) were purchased in a staggered manner in January 2014 in anticipation of trading profits and the same were sold, again in a staggered manner, in March 2014 when the trade went awry. The stock of Comfort was also in a steep fall when the company purchased it. However, the company purchased the stocks only when the price fall was sustained over a period of time. It is notable that the company did not enter/exit at the highest/lowest price and the trades in shares of Comfort were entered into on the basis of the trend visible in the then latest financials of the stock available publicly. 10.3 Regarding the third company, it has been demonstrated that Luminaire Technologies Ltd. ('Luminaire'), was a listed public company at the relevant time. That the shares of Luminaire were purchased in a staggered manner in January and February 2014 in anticipation of trading profits and the same were sold on the 5th of March 2014. The stock of Luminaire was also in a steep fall when the company purchased it. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased it.The shares of Global were purchased in a staggered manner in February 2014 in anticipation of trading profits and the same were sold, again in a staggered manner, in March 2014. However, the company purchased the stock only when the price fall was sustained over a period of time. That the stock parameters had improved from its previous reporting period (Total Assets of Rs.56.62 Crores in FYE Mar'13 as against Rs.20.90 Crores in FYE Mar'12; Operating Profit of Rs.1.49 Crores in FYE Mar'13 as against Rs.0.01 Crore in FYE Mar'12; Reported Net Profit of Rs.1.05 Crore in FYE Mar'13 as against Rs.0.08 Crore in FYE Mar'12 implying an increment of 1,212.50% and trend reversal). The company, being a prudent trader, did not only rely on the financials of Global to make its decisions in the market. It was also prone to keep tabs on the technical aspects of the stock to pre-empt market movements in it. Envisaging a further fall in the stock prices owing to its interpretation of the deteriorating technical parameters of Global even in the face of robust fundamentals, the company sought to exit its position in the stock completely for the time being. 10.6 It has been further explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee were quiet distinguishable from that of the cases of "Swati Bajaj & others"(supra). He has submitted that in most of the cases before the Hon'ble High Court, the purchases were off the Stock Exchange/private placements. That there were orders of SEBI suspending the scrip and/or wherein the concerned trader were found guilty of price manipulation. Further, that there were statements recorded from the brokers of the assessees, who had admitted to have indulged in price manipulation and therefore adverse view was taken. That in the specific facts before the hon'ble High Court, it was noted that the price of the scrips showed steep increase during recessive trends and therefore the movement in prices was held to be ingenuine. That the Hon'ble High Court had observed that the onus was on the assessee to establish that the price rise was genuine in light of the fundamentals of the scrip. However, in case of the assessee, the trades were made on the Stock Exchange. There was no adverse statement of assessee's broker. Moreover the Director of the assessee was examined and confronted with the allegations u/s 131 of the Act and he had specifically denied the same. That the assessee has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation wing report is that in the list of the persons whose statement was allegedly recorded and who in their statement have admitted of price rigging, the names of share brokers, entry operators and exit providers have been mentioned. The facts on the file itself show that there was meeting of minds of the entry operators and the share brokers and exit providers. The price rigging was done by giving benefit to various subscribers with connivance of share brokers and the motive was to convert their unaccounted money into tax exempt long-term capital gains and for that purpose, there were certain persons chosen as exit providers who would buy shares when the share prices would be at its peak and those exit providers thereafter would suffer losses on account of fall in the price of the shares. This specific fact on the file shows that the exit providers were already chosen to execute the plan. The motive was to give the benefit of bogus long-term capital gains to various beneficiaries and to make that plan foolproof, the exit providers were already chosen with a predetermined planning as to at what stage the beneficiaries of bogus long-term capital gains would be given exit. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cases are similar that the ratio of the former case becomes applicable to the latter case. As discussed above, in the absence of any direct incriminating evidence against the assessee, the distinguishable and weak circumstantial evidence, in our view, do not suggest the preponderance of probability of the assessee being involved in price rigging of the scrips or being the predetermined and pre planned beneficiary of the devised scheme, therefore, the impugned additions are not warranted in this case, and the same are accordingly ordered to be deleted." 38. Respectfully following the above decision of this Tribunal in the case of Raigarh Jute & Textile Mills Ltd. vs. ACIT (supra), which is squarely applicable on the facts of the instant case of assessee i.e., M/s. Gateway Financial Services Ltd., we find that the alleged loss has been incurred by the assessee in the regular course of its business. We also note that the statement of various persons recorded by the AO/investigation wing/search team in the course of other proceedings as well as the report of the Kolkata investigation wing, there is no reference to a direct evidence indicating that the transactions in question i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds exonerated, the assessee(s) from the charges levelled in the show cause notice issued to them. Therefore, when the assessee(s) have been exonerated and the charges against them have been waived and the transactions of purchase and sale of equity shares carried out by them have been found to be genuine, the theory of preponderance of probabilities is ruled out in the case of the present assessee(s). Thus, when the transactions giving rise to the long term capital gain have been found to be genuine, and as per rules and regulation of SEBI, the finding of the ld. CIT(A) deserves to be set aside and the impugned additions in case of assessee(s) in appeal before us are uncalled for. 13.1. In the case of Pr. CIT Vs. Renu Aggarwal (Supra), the Hon'ble Apex Court has dismissed the special leave petition filed by the revenue affirming the decision the Hon'ble High court of Allahabad in ITA No. 44 of 2022 which in turn has upheld the decision of the tribunal in ITA No. 204/Lkw/2020 A.Y. 2014-15 & anothers. The Hon'ble Apex Court, however, kept the legal issue open. We have perused the decision of the tribunal wherein the following findings of fact were recorded: "The above findings r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's claim u/s 10(38) of the Act where the assessee has filed the details of purchase and sales of shares alongwith contract notes for purchase and sale, D-mat A/C and bank statement and furthermore no incriminating materials were found against the assessee in the survey conducted in the premises of the assessee and therefore the AO could not deny the claim u/s 10(38) of the Act merely by relying on the statements of accommodation entry providers which were recorded much before the date of survey. In the present case before us the facts of the assessee are on better footing even as there is no survey on the assessee's premises and AO relied on the statements of entry providers which were recorded long ago. Besides there was no incriminating materials against the assessee found even in the premises of entry operators/stock brokers. Therefore this case also squarely applies to the facts of the case. 14. In view of the above discussion and in the given facts and circumstances of case, we are inclined to hold that the Assessing Officer has failed to carry out any independent investigations/enquiries into the evidences filed by the assessee and has rejected the claim by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
