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TMI Blog2025 (4) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (A) has erred in law in sustaining the rejection of claim u/s 10(38) on sale of listed equity shares, sale/purchase of which is duly supported with all the possible evidences without rejecting/finding any defect in evidences. 4. Because ld. CIT (A) further failed to appreciate that, addition is based on surmise and conjectures being : a) Reliance on behind the back statement for addition and reproduced in order is wrong in as much as none of party charged the transaction under question or assessee etc. b) No opportunity to cross the statements reproduced is ever provided. c) There is no evidence against the assessee except ref. to general modus operandi or ref. of unknown statement/cd. d) Because ld. AO erred in making ad hoc addition of Rs. 21,35,085/- being alleged payment of commission only on the imaginative basis without any material." 2. Brief facts of the case are, assessee has filed return of income showing income of Rs. 10,77,180/- on 26.08.2015. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 (for short 'the Act') along with questionnaire were issued and served on the assessee. In response, ld. AR of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... script of Alps Motor Financial Ltd. and the ITAT, in its wisdom, ruled in favour of the assessee's, holding that the transactions were genuine. Ld. AR of the assessee submitted written submissions which are reproduced below for the sake of clarity :- "Date Chart Showing Timeline of Events Sr. No. Date Event 1 1/11/2012 Purchase of 1,00,500 equity shares of Alps Motor Finance Limited at Rs. 2 each from Sh. Ashvin Verma (Total: Rs. 2,01,500, Payment Mode: Cash) 2 17/01/2014 Shares were dematerialized. 3 20/06/2014 Sale of 10,000 shares at Rs. 423 each through Share Broker i.e. Century Finvest Pvt. Ltd. (Payment Mode: Banking Channels) (Refer Page 30 of PB) 4 24/06/2014 - 17/07/2014 Sale of remaining shares through Share Broker i.e. Century Finvest Pvt. Ltd. (Payment Mode: Banking Channels) (Refer Page 30 of PB) The documents furnished before the Assessing Officer are: 1. Share Purchase Documentation: Provided a photocopy of the physical share certificate, bill, and payment receipt for the purchase of 100,500 shares of Alps Motor Finance Limited for Rs 2,01,500 in cash from November 2012. Also included confirmed account details and cash abstracts related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This inaction can be reasonably interpreted as an implicit acceptance of the ITAT's judgments by the Revenue, thereby substantiating the genuineness of the transactions involving the said shares of Alps Motors Finance Ltd. As such, it would be reasonable to assert that the Revenue's non-challenge sets a form of precedent that supports our contention in the matter at hand. Inappropriate Reliance on Unconfronted Statements and Failure to Allow Cross-Examination The Assessing Officer has leaned on certain key statements, including those from two brokers and Bikash Surekha, to build a case against the assessee. It is noteworthy that these statements were never presented to the assessee for the purpose of cross-examination, despite a formal request for such an examination being submitted by the assessee. The copy of this letter has been duly submitted before the court and can be found at page 5 of PB in the present submission. Moreover, the content of Surekha's statement conspicuously lacks any mention of the assessee, the broker facilitating the assessee's transactions, or Alps Motors Finance Ltd., the shares of which are at the center of the case. Similarly, Anil Kh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is important to highlight that the shares of Alps Motors Finance Ltd. are currently marketable and actively traded on the stock exchange as of today's date. This continued marketability serves as additional compelling evidence supporting the genuineness of the transactions in question. No inquiry or action by Income Tax Department on Assessee or broker or Alps Motors Finance Limited Additionally, it is pertinent to note that no other authoritative bodies, including but not limited to the Directorate of Revenue Intelligence (DRI) and the Income Tax Department, have initiated any inquiry or investigation against the broker, the assessee, or Alps Motors Finance Ltd. This collective non-action across multiple regulatory agencies not only lends credence to the integrity of the transactions but also severely undermines any broad allegations of financial impropriety leveled by the Assessing Officer. Lack of Direct Evidence and Generalized Accusations The Assessing Officer's (AO) case against the assessee is built on broad allegations and a generalized modus operandi concerning fraudulent capital gains. Despite the sweeping allegations, the AO falls short of providing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Folly of Imputing Guilt by Association Invoking a generalized modus operandi concerning bogus Long- Term Capital Gains does not suffice as a valid ground for undermining the assessee's legitimate, document-supported transactions. Without direct evidence or inquiry implicating the assessee, the application of Section 68, and consequently Section 69C, is unjustifiable. In summary, the absence of any specific material evidence or investigative findings that could reasonably implicate the assessee renders the additional imposition under Sections 68 and 69C as fundamentally flawed. In light of these considerations, it is imperative that the Assessing Officer's determinations be revoked, thereby validating the assessee's claim for an exemption under Section 10 on the grounds of Long-Term Capital Gain. By consolidating these points under one comprehensive heading, we aim to present a fortified argument that substantively challenges the Assessing Officer's misapplication of Section 68 and Section 69C, thereby making a robust case for the relief sought by the assessee. Integrity and Regulatory Compliance of Assessee's Share Broker i.e M/s Century Finvest Pvt Ltd and Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, ld. DR of the Revenue relied upon the orders of the authorities below. 7. Considered the rival submissions and material placed on record. We observed that the issue involved in the present case is exactly similar to the case of Vipin Jain (supra), individual. We have gone through the order of the ITAT in Vipin Jain, individual's case (supra) wherein the ITAT has decided the appeal in favour of the assessee wherein the scrip of Alps Motor Finance Ltd. was involved, which is also involved in the present case, and the relevant findings of ITAT are as under :- "8. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material referred to before us. The main contention of the ld. counsel before us was that nowhere the evidences filed by the assessee have been doubted and neither the purchase made in the earlier years has been disbelieved. The Assessing Officer has taxed only the net Long Term Capital Gain and alleged commission of 5% for arranging such Long Term Capital Gain. He drew our attention to the documents refuting to purchase of 628O0 equity shares for sum of Rs. 12,5,600/- in all market transaction to Shri Vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at the Market price ruling on the date of transaction on a screen based trading, therefore, the bald allegation against the assessee is wholly without substance particularly when no contrary evidence has been brought on record and the allegation is simply based upon the general modus operandi found by the Directorate of Investigation, Kolkata in various other penny stock shares. 11. In relation to reliance placed on the 2 broker's statements recorded by the, he submitted that firstly, none of these statements were confronted to the assessee during the course of assessment proceedings and even in the show cause notice, and secondly, even these statements do not disseminate the evidence furnished by the assessee as in none of these statements there is any reference to the transaction carried out in the shares of Alps Motors Finance Limited and so also the transaction of the appellant assessee. 12. The main case of the revenue is that, Bikash Surekha has accepted in the statement reproduced in the assessment order that two entities namely, (i) Duari Marketing; and (ii) Rachak Vinmay Pvt. Ltd. who had purchased the shares of Alps Motors Finance Limited were run by him and have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Year 2012-13 relevant to assessment year 2013-14 and is evidenced by the cash abstract and other related documents. Thus, possession of the share is not in doubt at all, because same is also reflected in DEMAT account maintained with DP and Vijaya Bank. Not only that, the sale of shares is also evidenced from transaction undertaken through SEBI registered Broker and after the sale of shares, the net receipts have been credited to the assessee's bank account. Hence, the nature of the transactions clearly purchase and sale of shares and the source of the credit, from the material facts on record are quite evident that it is from the sale of shares. Once, no material information has been brought on record to convert these transactions then it cannot be held that the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. Further, there is no finding or any whisper in the impugned orders that some unaccounted money has been routed through some accommodation entry provider or getting the bogus long-term capital gain. 15 In addition, one very important fact brought on record by the Ld AR is that the very same scrip was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dus operandi were providing Long Term Capital Gain / Short Term Capital Loss were unearthed and Assessing Officer has given sample of cash trail and how the mechanism works which has been illustrated by him in detail. He has given a master table and cash trail showing name of 18 broker companies/persons and concern jama kharchi companies and also name of various persons who were involved as share broker, promoter, beneficiaries or otherwise who were indulged in malpractices and whose case search and survey were carried out and submissions were recorded. From the bare perusal of these exhaustive list and information, it is seen that none of the shareholders or jama kharchi companies were involved in scrips of Alps Motors Finance Ltd. or nowhere the assessee's transaction or the name of assessee's broker or assessee being beneficiary has been mentioned. From the statement of the assessee also, nothing adverse can be inferred except that he has bought the shares from one Mr Vishal Yadav who met him in some marriage ceremony from whom assessee had made the purchases and assessee had sold the shares on the advice of brokers M/s Century Finvest Pvt. Ltd. Further, it has been mentioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prices of the Alps Motor Finance Ltd. were rigged or there was any kind of manipulation. In the present case, the shares have been transacted at a market price quoted on the date of transaction in the Stock exchange and on screen based trading, and therefore, to infer that the price have been rigged in violation of SEBI rules or guidelines may not be correct. There has to be some iota of evidence or incriminating material that, either Alps Motors Finance Ltd. was suspended or trading of its shares were banned by the SEBI for manipulating or rigging of the share price in the stock exchange or any action has been taken by the SEBI against the said company or against the brokers. Simply because the prices have risen in a short span of two years, that does not mean there is some kind of manipulation unless some authority have found so or there is any material or inquiry from it has been unearthed that the price of scrip of Alps Motor Finance Ltd. was manipulated for purpose of providing accommodation entry. Here in this case, there is neither any direct or indirect evidence made through inquiry from assessee's broker or from Directors of Alps Moto Finance Ltd. or otherwise. 20. One ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of Section 68, Once a Capital asset has been acquired, reflected in the accounts of the assessee and has been sold, for which necessary evidences have been filed and there is no adverse material or information or inquiry to prove that nature and source of credit as explained by the assessee is false, no adverse inference cannot be drawn and the evidences and explanation given by the assessee cannot be discredited. We again reiterate that though the accommodation entry of bogus Long Term Capital Gain is a menace which has been unearthed through investigation but general perception and general modus operandi sans any evidence or material or any kind of prima facie inquiry cannot render the transaction as sham bogus. In such cases, even if preponderance of probability is taken into consideration, then also the material and evidence adduced by the assessee have to rebutted by some kind of tangible material coming on record. Otherwise the evidences and explanation of the assessee cannot be discredited. Thus, on the facts and circumstances of the case as well as material available on record, we do not find any reason to sustain the addition made by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te its conclusions on the basis of any cogent material available on record before forming an opinion that the sale transaction was sham and a pre-planned arrangement to claim exemption under the guise of LTCG. 15. An upshot of the above findings of the ITAT, coupled with the fact that no irregularity was highlighted by the Securities and Exchange Board of India pertaining to the transaction of the scrips of the Company, would lead us to the conclusion that there is nothing adverse against the respondent-assessee which could establish a fictitious LTCG to claim exemption at the behest of the respondent-assessee. Rather, the arguments put forth by the Revenue are mere findings of fact. 16. In any case, the issues raised by the Revenue in the present appeals already stand covered by the decision of this Court in the case of PCIT v. Krishna Devi [2021 SCC OnLine Del 563], wherein, under similar facts and circumstances, it was held that the preponderance of probabilities cannot be a ground to reject the evidence put forth by the parties. The relevant paragraphs of the said decision read as under: - "11. On a perusal of the record, it is easily discernible that in the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from demat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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