Subject: Claimed Long Term Capital Gains
Referred Sections:
Section 10(38) of the I.T. Act.
Section 68 of the Act
Section 115BBE of the IT Act.
Section 144 of the Evidence Act."
Section 40A(3), it
Referred Cases / judgments
Pr. CIT vs. Prempal Gandhi – ITA.No.95 of 2017
Pr. CIT vs. Shri Hitesh Gandhi – ITA.No.18 of 2017
Meenu Goel vs. ITO – ITA.No.6235/Del./2017
Chander Prakash vs. ITO – ITA.No.6880/Del./2017
ITO vs. Arvind Kumar Jain HUF ITA.No.4862/Mum/2014
Prakash Chand Bhutoria vs. ITO ITA.No.2394/Kol./2017
CIT Vs Sanghamitra Bharali (361 ITR 481)
Meenu Goel vs ITO in ITA No.6235/Del/2017
CIT vs Prem Pal Gandhi in ITA No.95-2017
Ludhiana vs. Prem Pal Gandhi passed in ITA No. 95 of 2017
Ludhiana vs. Sh. Hitesh Gandhi, Bhatti Colony,
Smt. Shikha Dhawan vs. ITO
Attar Singh Gurmukh Singh v. ITD
CIT v. Durga Prasad More 82 ITR
(lTAT Mumbai) v. Santlal Gupta
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "SMC" : DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
ITA.No.389/Del./2018
Assessment Year 2014-2015
Smt. Sunita Khemka,
5A/4B, Ansari Road, The ACIT, CC-15,
Darya Ganj, New Delhi vs Jhw. Extension,
PIN 110 002. New Delhi.
PAN ABGPK4707P
(Appellant) (Respondent)
Shri Raj Kumar, C.A. &
For Assessee :
Shri Sumit Goel, C.A.
For Revenue : Shri S.L. Anuragi, Sr. D.R.
Date of Hearing : 12.07.2018
Date of Pronouncement : 02.08.2018
ORDER
This appeal by assessee has been directed against
the order of the Ld. CIT(A)-XXVI, New Delhi, dated 28.12.2017,
for the A.Y. 2014-2015 on the following grounds :
1. That under the facts and circumstances, both the lower
authorities erred in law as well as on merits in assessing
the declared LTCG of Rs.47,16,264/- on sale of shares
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Khemka, New Delhi.
as unaccounted income and further erred in not allowing
the exemption u/s. 10 (38) as claimed.
2. That in the absence of confronting with the adverse
material used against the assessee and in the absence
of providing cross-examination of persons whose
statements have been recorded on the back of the
assessee, no cognizence of such material an statements
should had been taken."
2. Briefly, the facts of the case are that assessee filed
her return of income for assessment year under appeal on
30.07.2014 declaring total income of Rs. NIL. This case was
taken up for scrutiny under CASS with main reason for
selection being to examine the source of suspicious long term
capital gain claimed exempt from taxation under section
10(38). During the assessment proceedings, it was noticed that
the assessee has claimed Long Term Capital Gains of
Rs.46,63,728/- on sale of shares of following companies.
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
Name of the Sale Price Purchase Transfer Exempt U/s.
Company Price Expenses 10(38).
HPC
Biosciences 23,23,548/- 25,000/- --- 22,99,548/-
Ltd.
Esteem Bio
Organic &
Food 25,66,716/- 1,50,000/- --- 24,16,716/-
Processing
Ltd.,
Total 47,16,264/-
2.1. The A.O. issued show cause notice and asked the
assessee to furnish supporting documents and to explain
such an exponential rise in the price of shares in merely 13-
14 months that too without any positive indication in the
basic fundamentals or earnings of the companies in which
assessee have made investment and asked the assessee as
to why the same be not added to the income of the assessee.
Copy of the show cause notice issued to the assessee is
reproduced in the assessment order in which A.O. has also
noted that assessee has furnished bank account statement,
Demat account and broker's note to strengthen the claim of
long term capital gains. The A.O. however, proposed that it
is an arranged transaction through penny stock companies
4
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
who rigged the price of shares. The A.O. referred to some
report of the SEBI order and statements of certain persons
i.e., Mr. Somain Choudhary and Mr. Sanjay Vora etc. The
assessee replied each and every query of the A.O. supported
by documentary evidence to show that assessee entered into
genuine transaction and that none of the enquiries
conducted at the back of the assessee are relevant to
assessee and have also have not been confronted to assessee.
Therefore, no additions should be made. The A.O. however,
did not accept the contention of assessee and held that the
claim of long term capital gains is prima facie bogus. A.O.
accordingly made addition of Rs.47,16,264/-. The Ld. CIT(A)
on the same reasoning as given by the A.O. based on
investigation conducted by the Income Tax Department and
Order of SEBI, confirmed the addition and dismissed the
appeal of assessee.
3. The Learned Counsel for the Assessee has reiterated
the submissions made before the authorities below and
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
submitted that the assessee sold the shares of two companies
above for which long term capital gains was earned and claimed
exemption under section 10(38) of the I.T. Act. In the case of
HPC, shares were purchased directly from company in
preceding A.Y. 2013-2014 on preferential allotment. Purchases
was not doubted in preceding A.Y. 2013-2014. Purchases were
through banking channel. He has filed copy of the share
application form in the paper book with letter from HPC for
allotment of 2500 shares along with intimation of allotment of
bonus shares supported by bank statement showing payment
of purchase cost. Similarly, sale was proved through documents
i.e., broker note for sale of 1200 shares by ISF (Broker) dated
19.03.2014 and similarly sold shares through the same broker
on 20.03.2014 and 21.03.2014. The transaction statement for
sale of shares through Demat account are filed in the paper
book which is supported by ledger account in the book of the
broker and bank statements showing credit of sale proceeds.
Learned Counsel for the Assessee further submitted that in the
case of M/s. Esteem Bio Organic & Food Processing Ltd., these
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
shares were directly purchased from company in preceding A.Y.
2013-2014 in IPO. Purchases is not doubted which is through
banking channel. The purchase is proved through share
application form of IPO, copy of the cheque issued for IPO
allotment, allotment letter, copy of Demat account showing IPO
and bank statement showing payment of Rs.1,50,000/- The
sales stand proved through broker note dated 06.03.2014,
07.03.2014 and 10.03.2014. The transaction statement for sale
of shares through Demat account supported by ledger account
in books of broker and bank statement showing credit of sale
proceeds, all the documents are filed in the paper book. Learned
Counsel for the Assessee submitted that shares have been
purchased through banking channel and through Demat
account through broker/recognized stock exchange. Sales are
subjected to STT. Sales have been made after retaining the
same for a period of more than 12 months. All the shares are of
listed company registered in stock exchange. The purchase and
sales are at prevailing market price. Learned Counsel for the
Assessee submitted that all these documentary evidences have
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
not been disputed by the authorities below and no enquiry have
been made for the same. Therefore, assessee entered into
genuine share transaction and also proved conditions of Section
10(38) of the I.T. Act. The findings of the authorities below are
without basis and without justification. The report of the SEBI
cannot be taken as evidence to prove the transaction as non-
genuine. In the interim SEBI report dated 29.06.2015, name of
the assessee was not included in the list of dubious entities and
also large number of persons which were included in the report
dated 29.06.2015 were given clean chit by SEBI vide interim
report dated 06.09.2017. Thus, the assessee was never listed
by SEBI as doubtful person. The report of the Investigation
Wing, Kolkata is not relevant to the case of the assessee. A.O.
referred to statements of Mr. Somain Choudhary and Mr.
Sanjay Vora with whom assessee has no transaction. Their
statements are not subjected to cross-examine, therefore,
cannot be read in evidence against the assessee. The objections
of the A.O. are incorrect. Learned Counsel for the Assessee in
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
support of the above contention relied upon the following
decisions :
(i) Pr. CIT vs. Prempal Gandhi ITA.No.95 of 2017 dated
18.01.2018 (P & H ) (HC).
(ii) Pr. CIT vs. Shri Hitesh Gandhi ITA.No.18 of 2017
dated 16.02.2017 (P & H ) (HC)
(iii) Meenu Goel vs. ITO ITA.No.6235/Del./2017 dated
19.03.2018 (ITAT) (Delhi, SMC-Bench)
(iv) Chander Prakash vs. ITO ITA.No.6880/Del./2017
dated 12.03.2018 (ITAT) (Delhi SMC-Bench)
(v) ITO vs. Arvind Kumar Jain HUF
ITA.No.4862/Mum/2014 dated 18.09.2017 (ITAT)
(Mum. H-Bench).
(vi) Prakash Chand Bhutoria vs. ITO
ITA.No.2394/Kol./2017 dated 27.06.2018 (ITAT)
(Kolkata, SMC-Bench).
4. On the other hand, Ld. D.R. relied upon the orders of
the authorities below.
5. I have considered the rival submissions and perused
the material available on record. On the identical issue and
identical facts, the ITAT, Delhi, SMC-Bench in the case of Smt.
Shikha Dhawan, Gurgaon vs. ITO, Ward-4(2), Gurgaon in
9
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
ITA.No.3035/Del./2018 for the A.Y. 2014-2015 vide Order
dated 27.06.2018 allowed the appeal of assessee. The order is
reproduced as under :
"This appeal by the assessee has been directed
against the order of Ld. CIT(A)-1, Gurgaon dated
09.03.2018 for AY 2014-15 on the following grounds:-
1. "That the learned Commissioner of Income Tax (Appeals)
1, Gurgaon has further grossly erred both in law and, on facts in
denying the claim of exemption of long term capital gain of Rs.
19,39,357/- on sale of shares sold on recognized stock exchange
and, eligible for exemption u/s 10(38) of the Act and bringing to
tax as unexplained credit u/s 68 of the Act.
2. That learned Commissioner of Income Tax (Appeals) has
also erred both in law and on facts in making an addition of Rs.
19,51,357/- being sale consideration on sale of shares listed on
recognized stock exchange as unexplained credit u/s 68 of the
Act. "
2.1. That while sustaining the aforesaid addition and denying
the exemption learned Commissioner of Income Tax (Appeals)
has failed to appreciate that, appellant was owner of equity
shares of a listed company which had been held by it for a period
exceeding 12 months and the same were sold on recognized
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
stock exchange after payment of STT, resulting into a long term
capital gain and therefore the long term capital gain accrued to
the assessee on transfer of long term 'capital asset' was not
includible in total income of the assessee in view of section 10(38)
of the Act.
2.2. That the learned Commissioner of Income Tax (Appeals)
has failed to appreciate the evidence tendered by the appellant
to support the claim of sale of shares and hence, findings
mechanically recorded on borrowed inference in disregard of
evidence and based on irrelevant and extraneous considerations
are misconceived and, misplaced.
2.3 That the learned Commissioner of Income Tax (Appeals)
has confirmed the above addition and denied exemption
without confronting the material/investigation to appellant and
also providing cross examination of the parties on whose
statements reliance has been placed in impugned order of
assessment and therefore order so made is in disregard of
principles of natural justice is vitiated.
2.4 That further more the learned Commissioner of Income
Tax (Appeals) has sustained the addition on mere speculation,
generalized statements, theoretical assumptions and allegations
and assertions, without there being any supporting evidence and
is therefore not in accordance with law.
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
2.5 That learned Commissioner of Income Tax (Appeals) has
failed to appreciate that once the broker of the assessee M/s
Indus Portfolio (P) Ltd. had neither denied and nor disputed the
genuineness of transaction, the conclusion arrived in the order is
highly whimsical, arbitrary, illogical and wholly untenable.
2.6 That the learned Commissioner of Income Tax (Appeals)
while sustaining the above addition has arbitrarily and,
mechanically rejected the explanation and evidence tendered by
the appellant and made the addition and denied exemption by
drawing subjective, premeditated and preconceived inferences
therefore the same is not sustainable.
2.7 That the finding of the learned Commissioner of Income
Tax (Appeals) that the appellant did not divulge the name of the
person who advised her to buy the shares of MIs. Turbo Tech
Engineering Ltd. and appellant did not have basic knowledge of
share trading are irrelevant considerations either to bring to tax
long term capital gain under section 68 of the Act or deny claim
of exemption under section 10(38) of the Act and therefore, the
addition made and confirmed is invalid.
2.8 That various adverse findings and conclusions recorded
by the learned Commissioner of Income Tax (Appeals) are
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
factually incorrect and contrary to record, legally misconceived
and untenable.
2.9 That the learned Commissioner of Income Tax (Appeals)
has erred in concluding without any basis that assessee has
introduced his unaccounted income in the form of long term
capital gain by manipulating the penny stock.
3 That the learned Commissioner of Income Tax (Appeals)
has also erred both in law and on facts in not allowing
depreciation of cost incurred on purchase of shares and sold by
the appellant in the next year.
It is therefore, prayed that it be held that exemption denied
and addition made and sustained by the learned Commissioner
of Income Tax (Appeals) may kindly be deleted and appeal of
the appellant be allowed."
2. I have heard Ld. Representatives of both the parties
and perused the findings of the authorities below. In all the
grounds of appeal, the assessee challenged the addition of
Rs.19,51,357/- u/s 68 of the Income Tax Act, 1961 (in short
"Act").
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
3. Brief facts of the case are that return declaring income
of Rs. 5,31,370/- was filed on 18.11.2014. In this return
the assessee had claimed long term capital gains of
Rs.19,39,557/- as exempt u/s 10(38) of the IT Act. The
Assessing Officer referred to the investigation carried out by
the Directorate of Investigation, Kolkata to unearth the
organized racket of generating bogus entries of long term
capital gains which is exempt from tax. After discussing the
modus of such racket of generating of bogus entries, the
Assessing Officer pointed out that the Directorate of
Investigation, Kolkata investigated transactions in 84
penny stock shares quoted on BSE and examined on oath
a large number of brokers, promoters and entry operators.
As a result of this investigations, large number of
individuals had been identified who had taken such
accommodation entries and a number of such individual
had surrendered the accommodation entry for taxation
purposes. The Assessing Officer pointed out that the
assessee was also beneficiary of the accommodation
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
entries. In this regard the Assessing Officer pointed out the
following facts:-
"8. The assessee is one such beneficiary who has taken
the entry of Rs. 19,39,357/- during the assessment year 2014-15
under consideration along with other so many persons. Thus the
facts of this case, therefore, should not be viewed in isolation but
as one of the beneficiary in the larger aforementioned scheme.
8.1. During the course of assessment proceedings, the
AR of the assessee furnished written submissions enclosing
copies of computation bank statements and furnished the details
of long term capital gain. The assessee purchased the 10,000
shares of M/s Turbo Tech Engineering Ltd. off market on
22.11.2011 from M/s Shree Ji Broking Pvt. Ltd., who was the
original allottee of the shares for a total sale consideration of
Rs.20,000/- -i.e. Rs.2 per share. Payment was made by the
assessee to M/s Shree Ji Braking Pvt. Ltd in cash on 24.11.2011
and the shares were got transferred in her name 28.11.2011. Later
on out of these 6000 shares were sold on 30.07.2013 and
31.07.2013 (500+5500=6000) through the broker M/s Indus
Portfolio Pvt. Ltd, for a total sale consideration of Rs. 19,53,372/-
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
8.2. On going through the information made available
prima facie it is found that the assessee indulged in bogus Long
Term Capital Gain and claimed the above amount as exempt
u/s. 10(38) of the Act, 1961. It is also found that the above scrip
M/s. Turbo Tech Pvt. Limited, which the assessee purchased,
was involved in providing bogus accommodation entries in the
shape of bogus Long Term Capital Gains. "
3.1. All these facts were brought to the notice of the
assessee by the Assessing Officer in the show cause dated
19/12/2016 and the appellant was asked to explain why
transactions may not be held to be accommodation entry.
The Assessing Officer also referred to the Investigation
conducted by the Investigation Wing Kolkata and
particularly referred to the statements of Sh.Anil Kumar
Khemka recorded u/s 131 of the Act wherein it was stated
by these persons that M/s Turbo Tech Ltd was used for the
purpose of providing accommodation entries. After
considering the facts of the case and the submissions of the
assessee, the Assessing Officer held that the transaction
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
was a accommodation entry and in this regard observed as
under:-
"9.1. The assessee sold the shares on 30.07.2013 &
31.07.2013 (500+5500=6000) through the broker M/s Indus
Portfolio Pvt. Ltd, for a total sale consideration of
Rs.19,53,372/- for which the shares were dematerialized
only on 11.06.2013. It is thus evident that just a few days
prior to the date of sale, these shares are dematerialized
though these are said to have been purchased on
22.11.2011. The transaction entered into by the assessee
does not authenticate long term capital gain in view of the
fact that these physical shares were purchased through off
market and these shares were dematerialized only just a
few days prior to the date of sale.
10. The assessee has shown credit of
Rs.19,51,357/- in his bank account as sale proceeds of
shares. As is evident from the investigation the actual
source of this credit is the unaccounted cash of the
assessee. The assessee was asked to explain the source of
this credit. The explanation offered that it is sale proceeds
of shares are found to be not only unsatisfactory but false.
The assessee has been confronted with all the evidence
17
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
gathered and the issues mentioned in the foregoing
paragraphs. The explanation of the assessee is general in
nature that as the transaction is through Stock Exchange
and the payment is by cheque, the transactions should be
treated as genuine. The background of the scheme given in
the beginning of the 'order clearly shows that both the
requirements are in built in the scheme and does not ipso
facto prove genuineness of transaction. The SEBI after
thorough investigation has certified that such transactions
are rigged and are carried out to convert Black money into
white. That being so, the credit in the bank account of the
assessee cannot be treated as explained and is therefore,
liable to be added under section 68 of the Act. The evidence
gathered has to be evaluated in the background of what
the Hon'ble Supreme Court referred to as the test of
preponderance of human probability judged on the basis
of surrounding circumstances. That there was a scheme is
not in doubt and that the assessee is a beneficiary is also an
admitted fact. The onus was therefore, on the assessee to
prove that either there was no such scheme and even if
there was one, the benefit to the assessee was as a result of
genuine transaction. The assessee has miserably failed to
discharge this onus and therefore, the only inescapable
18
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
conclusion is that like thousand other individuals the
assessee has also taken entry of bogus LTCG by paying
unaccounted income.
10.1. It is true that in cases in which a receipt is
sought to be taxed as income, the burden lies on the
Department to prove that it is within the taxing provision
and if a receipt is in the nature of income, the burden of
proving that it is not taxable because it falls within
exemption provided by the Act, lies upon the assessee. But,
in view of Section 68 of the Act, where any sum is found
credited in the books of the assessee for any previous year;
the same may be charged to income tax as the income of
the assessee of that previous year if the explanation offered
by the assessee about the nature and source thereof is, in
the opinion of the Assessing Officer, not satisfactory. To
reiterate, the burden of proof, cast upon the assessee to
prove that the claim of long term capital gain as exempt
u/s 10(38), is not discharged in the instant case. "
3.2. The Assessing Officer referred to all the
aforesaid facts and held that LTCG amounting to Rs.
19,39,357/- was unaccounted income of the assessee and
added the same to the total income of the assessee u/s 68
19
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
of the IT Act. The Assessing Officer further held that the tax
on these additions would be charged as per section 115BBE
of the IT Act.
4. The assessee challenged the addition before Ld.CIT(A)
and filed a written submission which is reproduced in the
appellate order which reads as under:-
1. "While assessing the income of the appellant, Ld. AO
completely ignored the facts of the case and the
documents/evidences filed by the appellant. Appellant
purchased shares, get the shares dematerialized, sold the shares
on recognized stock exchange, paid STT and received amount
through banking channel from the broker. Copy of bills of
purchase of shares; copy of Share certificates, copy of share
transfer form, copy of bank statement, copy of Demat account,
and copy of account from the broker M/s Indus Portfolio P. Ltd
are enclosed herewith.
2. Ld. AO has mentioned several persons in his assessment
order including Sh. Anil Khemka, Sh. Sanjay Vohra, Bidyoot
Sarkar and Sh. Nikhil Jain on which Income tax survey were
conducted by the department. In this regard, it is to submit that
the appellant has no direct or indirect relation with any of
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
these persons or with the Director/Promotors of the company
M/s Turbotech Engineering Ltd. or any of their subsidiary or
associate companies or concerns. Appellant never dealt with
them and the Ld. AO also fails to provide any evidence which
establishes any kind of relationship, between the appellant and
these persons. Broker of the appellant is M/s Indus Portfolio P.
Ltd and the Ld AO could not mention any evidence or material
which shows that my broker is involved in any kind of
manipulation of shares.
Ld. AO also didn't confront copies of statement recorded of Sh.
Anil Khemka, Sh. Sanjay Vohra, Bidyoot Sarkar and Sh. Nikhil
Jain to the appellant during assessment proceedings and
enclosed copies of their statement in the assessment order only.
This is done by the Ld. AO in clear violation of the provisions of
law by not confronting the material to the appellant and by not
giving any adequate opportunity to the appellant to defend his
case. Since the statements were not confronted to the appellant,
appellant was deprived of her right to cross examine the
witnesses. Also whatever they have stated in their statement is
no gospel truth and cannot be applied blindly to our case.
3. Statements of four persons incorporated by the Ld.
AO in assessment order are incomplete. Ld. AO has
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
incorporated only a part of statement in the assessment order
according to his choice, which is again against the basic
principles of law.
4. Ld. AO has also enclosed copy of some order of SEBI.
This order also was never confronted to the appellant during
assessment proceedings. Moreover, the order which is not very
legible, seems to be passed in year 2015, whereas the appellant
had purchased the shares in year 2011 and sold them in year
2013. It was evident from this document only that no action has
been taken by the SEBI against the company during the period
when the appellant holds the shares.
5. Documents incorporated by the Ld. AO in the
assessment order at Page 20 to 22 are not at all legible. Therefore
appellant is not in a position to comment on these documents.
6. Ld. AO has raised objection regarding the cash
purchase of shares and that shares were dematerialize few days
back only from the date of sale. In this regard, it is to submit that
there is no law which prohibits the purchase of shares in cash.
Appellant filed copy of bills of purchase, copy of share
certificates and transfer forms etc. before Ld. AO and no adverse
inference could be drawn only because the shares were
purchased in cash. Regarding Demat of shares, it is to submit
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
that it is the option of the buyer of shares to keep the shares either
in Demat form or in paper form. Merely because the shares were
get Demat by the appellant at a later stage, no adverse inference
could be drawn.
7. Ld. AO has no evidence in his favour to prove that
the transaction of purchase and sales of shares is bogus and he is
proceeding only on suspicion, conjectures and surmises. Ld. AO
has failed to prove any material on record which proves that the
transaction on the Recognised Stock Exchange is manipulated
and bogus.
8. Increase and decrease in market rates of shares on
stock exchange always based on market forces and are
determined on the basis of so many factors. It is not within the
power of appellant to manipulate the rates of shares on stock
exchange. Merely because there is, a sharp increase in the rates
of shares, no adverse inference could be drawn only on the basis
of mere suspicion and in absence of any direct or cogent
evidence.
9. Ld AO has alleged in his assessment order that the
appellant was not produced before him for recording of
statement. In this regard, it is to submit that the appellant had
delivered a baby few time back only and she was not in a
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
position to appear before the Ld. AO due to her medical
condition. We had made this request before the Ld AO also along
with medical certificate and requested him to pass the
assessment order on the basis of documents/information
available on record.
10. Case laws relied upon by the Ld AO are
distinguishable on the facts and circumstances of the present
appeal and hence are not applicable.
11. Appellant's case is covered by following judgements:
Hitesh Gandhi, ITA No. 180 of 2017( P & H High Court)
Prem Pal Gandhi, ITA No. 95 of 2017 (P&H High Court)
Carbo Industria! Holdings Ltd. 244 ITR 422 (Cal)
Himani M Vakil, 41 taxmann.com 425 (Guj)
Mukesh Ratilal Marolia, ITA No. 456 of 2007 (Bombay High
Court)
Smt. Jamnadevi Agrawal 328 ITR 656 (Bom)
Ashish International, ITA No. 4299 of 2009 (Bombay High Court)
Farrah Marker, ITAT Mumbai Bench in ITA No.
3801/Mum/2011
Sunil Prakash, ITAT Mumbai Bench in ITA No.
6494/Mum/2014
Pardeep Kumar Aggarwal 159 ITD 54 (Chandigarh)
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ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
Sri Dolarrai Hemani, ITAT Kolkata Bench in ITA No.
19/Kol/2014
Indravadan Jain HUF, ITAT Mumbai Bench in ITA No.
4861/Mum/2014
Kamla Devi S Doshi, ITAT Mumbai Bench in ITA No.
1957/Mum/2015
Surya Prakash Toshniwal, ITAT Kolkata Bench in ITA No.
1213/Kol/2016
Sunita Jain, ITAT Ahmedabad Bench in ITA No. 501 &
502/Ahd/2016 Pratik Suryakant Shah, 77 taxmann.com 260
(Ahmedabad-Trib)
Copy of all these judgements are enclosed herewith.
12. Ld. AO also erred in' making addition u/s 68 of the
Act, although the impugned addition should not be made under
this section. As per the requirement of law, appellant need not to
maintain any books of accounts and in absence of books of
accounts, no addition could be made U/S 68 of the Act.
13. That the GOA No.5 is regarding issuance of notice
u/s 143(2), which was issued by the ITO, Ward-27(4), New
Delhi. ITO, Ward-27(4), New Delhi has no jurisdiction over the
case of the appellant and hence notice issued was without
jurisdiction and invalid.
25
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
In view of above submission, it is prayed that all the
additions made may kindly be deleted & the appeal of the
appellant may kindly be allowed & oblige."
5. Ld.CIT(A) considering the explanation of the
assessee and material on record, not only confirmed the
addition of Rs.19,39,357/- but also enhanced the same
addition to 19,51,357/- Thus, the appeal of the assessee
has been dismissed with enhancement. The findings of Ld.
CIT(A) in para 3.5 to 3.18 is reproduced as under:-
3.5. "I have carefully considered the appellant's submissions.
Before going to the merits of the issue at hand it may be relevant
to look into the general modus operandi adopted by the persons
who indulge in converting their unaccounted cash to accounted
form through the route of capital gains. With the exemption
reduction in tax on capital gains on shares, there is rampant
practice of routing the unaccounted cash in the form of long term
capital gains and claiming the same as exempt/ concessional tax
rate. The general modus operandi adopted by such type of
persons is as under:
26
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
(i) With the collusion of broker, shares are purchased of an
unknown company with dubious background for
miniscule consideration. For this purpose, the broker
issues a fake brokerage note.
(ii) The companies in which shares are traded are usually
in league with the broker and the broker undertakes off-
market transactions to accommodate the appellant.
(iii) After a year, the shares are sold back by the buyer.
(iv) In the meantime, the shares prices are rigged by the
concerned broker/company to an abnormally high level.
(v) The shares are sold by the buyer and sale consideration
is received. The sale consideration is in fact first paid by
the buyer in cash to the broker. This cash consideration
which is- introduced in a banking channel by routing
through a number of accounts, finally reaches the accounts
of the broker. With this amount, the broker pays the
consideration to the buyer.
(vi) Thus the buyer's own cash is introduced and comes
back in the form of long term capital gain thereby claiming
concessional tax rate.
27
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Khemka, New Delhi.
(vii) The scrip invested is an obscure one in most cases. It
is merely Shell Company with no activities whatsoever.
(viii) The buyer himself is normally unaware of the
financial performance of the company in which he has
invested.
(ix) The shares are purchased at lower rates and sold at
higher rates through the series of off-market transactions
created by the broker with vested interest. The share prices
are artificially rigged through off market transactions. This
hike is not supported by the fundamentals of the company.
3.6. To fully appreciate the issue at hand it is relevant to
take notice of these commonly known notorious facts
about the modus operandi of converting the unaccounted
funds through willing dubious entities. Reference in this
regard can also be made to the following decisions:-
(a) CWT v, Rohtas Industries Limited, 67 ITR 283 (SC),
wherein it was held that-
"In the absence of any direct evidence, a judicial or
quasi-judicial Tribunal can base its conclusions on
the basis of what are known as notorious facts
28
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
bearing in mind the principles of Section 144 of the
Evidence Act."
(b) Attar Singh Gurmukh Singh v. ITD,"191 ITR 667 (SC),
wherein, while interpreting the provisions of Section
40A(3), it was held that-
"In interpreting a taxing statute, the court cannot be
oblivious of the proliferation of black money which
is under. circulation in our country."
3.7. It may now be relevant to refer to the various facts
which emerge from the assessment order-and the
submission of the appellant which are as under:-
i) The appellant purchased 10,000 shares of M/s Turbo
Tech Ltd for an amount of Rs. 20,000/-.
ii) The shares were purchased in off market transaction
from M/s Shree Ji Broking Pvt Ltd.
iii) The shares were purchased in the name of the
Appellant on 22.11.2011.
iv) Payment for these shares was claimed to have been
made on 24.11.2011 by cash i.e. two days after the shares
were purchased.
29
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
v) The shares were dematerialised just before the sale
of shares.
vi) The shares were sold on in July 2013 for an amount of
Rs. 19,53,372/-.
3.8. Further, from the details gathered by the AO during
the course of assessment proceedings following facts
emerge:-
i) During the course of proceedings u/s 131(1) of the IT
Act before the Investigation Wing Sh. Anil Kumar Khemka
stated that his brokerage company was being used for
providing accommodation entries in various scrips and
M/s Turbo Tech Ltd was once such scrip.
ii) The financials of the penny stock M/s Turbo Tech
Ltd. and movement of the price is abrupt, unrealistic and
not based upon any realistic parameters. The history of
investment in shares made by the appellant also generally
reveals that she has not been dealing in shares on a regular
basis. It has also been found that entries of LTCG have also
been taken by other members of the family of the
appellant.
30
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
iii) The purchase of these shares were claimed to be
through off market deals and not through Stock Exchange
and the shares were not entered in D'mat account even
upto one week before they were actually sold and the sale
is through stock exchange. The appellant furnished the
account copy of the D'mat account wherein it was
observed that the said shares were D'materialized only a
month before they were actually sold. The date of
dematerialization is only on 11.06.2013 and the shares were
sold during the period from 30.07.2013 to 31.07.2013.
iv) The appellant is unable to furnish any other proof for
purchase of shares except the bill issued by the broker.
v) The relevant colums in the purchase bill i.e. order
No., Trade No., and Trade Time are left Blank.
vi) No Proof/source of payment for purchase of these
shares was brought on record. The payment was claimed
to have been made in cash.
vii) The purchase of the shares cannot be verified from
the Calcutta Stock Exchange since the vital colums in the
said broker bill such as Order No, Trade No. & Trade Time
was left blank.
31
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
3.9. As per appellant's own version, the shares were
purchased M/s Shree Ji Broking Pvt Ltd on 22.11.2011
directly in cash and not through recognized stock
exchange. Moreover, as per the documents on record the
shares were purchased in the name of appellant on
22.11.2011 whereas the payment of the same as made only
on 24.11.2011. Thus as per the facts on record the shares
were purchased in the name of the appellant even before
the payment was made. Further, from all the aforesaid
facts, it is evident that the meager investment of Rs. 6,000
made by the appellant on 22.11.2011 went up to more than
Rs.19 lakhs within a period of 24 months. Such a steep rise
in value of investment is not within the realm of human
probability. In these circumstances, it is evident that the
transaction was as an arranged affair between the
appellant and the accommodation entries providers and
this fact has been duly admitted by Sh. Anil Kumar
Khemka and Nikhil Jain referred to above. From the facts
discussed above it is evident that M?s Turbo Tech Ltd was
being used for the purpose of providing entry of long term
capital gains by the entry providers and the transaction of
sale and purchase of shares M/s Turbo Tech Ltd was not
genuine transaction.
32
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
3.10. From the facts on record it is also evident that
the appellant is not a regular investor in shares. Hence, it
is quite surprising as to how she earned a phenomenal
return of almost 50 times within a short span of period
which is extremely unusual. This being the case, it is
apparent that the appellant has entered into a sham
transaction with the full knowledge of it, so as to convert
unaccounted money into accounted money in the guise of
capital gains.
3.11. The apparent is true until and unless it is
disproved. Here in the instant case, the Managing Director
and other Director Shri Nikhil Jain & Shri Anil Kumar
Khemka on 02.06.2015 & 30.03.2015 of Abhinandan Stock
Broking Pvt. Ltd. & Devshyam Stock Broking Pvt.ltd, had
categorically stated that they were involved in providing
accommodation entries regarding sale and purchase of
shares through his companies. Therefore, human
probabilities have also to be applied to comprehend the
transactions and to see the real intention behind entering
into these transactions. In similar circumstances, the
honourable Gauhati High Court of CIT Vs Sanghamitra
Bharali (361 ITR 481) had held that the capital gains are
sham transactions entered only to give colour of
33
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
genuineness and therefore, held that the capital gain
arising out of these transactions cannot be believed as
genuine and upheld taxing the said amount as
unaccounted income brought into books in the guise of
exempted capital gains.
3.12. The Assessing Officer has referred to the issue
of the organized racket of generating bogus entries of long
term capital gains which is exempt from tax and has
discussed the modus operandi of this operation in para 7.1,
para 7.2 and para 7.3 of the assessment order. The
Assessing Officer has held that the facts in the appellant's
case show that the amount of capital gains generated in the
transaction within a short span are beyond human
probability. I agree with this observation of the Assessing
Officer. These types of companies function in the capital
market whose sale price is manipulated to astronomical
height only to create the artificial transaction in the form of
capital gain. Surrounding circumstances differ from the
normal share market transactions in which they are
ordinarily carried out. Taking all the steps together, final
conclusion does not accord with the human probabilities.
The Hon'ble Supreme Court in the case of CIT v. Durga
Prasad More 82 ITR 540 held as under:
34
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
"It is a story that does not accord with human
probabilities. It is strange that High Court found
fault with the Tribunal for not swallowing that story.
If that story is found to be unbehevable as the
Tribunal has found and in our opinion, rightly that
the decisions remains that the consideration for the
sale proceeded from the assessee and therefore, it
must be assumed to be his money. "
3.13. Generally, it is expected that apparent is real
but it is not sacrosanct. If facts and circumstances so
warrant that it does not accord with the test of human
probabilities, transactions have been held to be non-
genuine. It is highly improbable that share price of a non
descript company can go up by almost 50 times, in a short
span of time. The taxing authorities are not required to put
on blinkers while looking at the documents produced
before them. They are entitled to look into the surrounding
circumstances to find out the reality of the recitals made in
those documents. Mere receipt by cheque does not render
a transaction genuine. Capital gain tax was created to
operate in a real world and not that of make belief. Facts of
the case only lead to the inference that these transactions
are not genuine. Similar view has been held by the Hon'ble
35
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
Jurisdictional Punjab & Haryana High Court in the case of
Balbir Chand Maini V/s CIT 340 ITR 161 (P&H) 247 CTR
468 (P&H) and the Case of Som Nath Maini V/s CIT 306
ITR 484 (P&H).
3.14. Reference in this regard may also be made to the
following case laws.-
I. Sanjay Bimal Chand Jain L/h of Shanti Devi Bimal
Chand Jain V/s CIT ITA No. 18/2017 (Mumbai High Court
Nagpur Bench)
II. Ratnakar M. Pujari V/s ITD ITA No. 995/Mum/2012
(res) dated 03/08/2016
III. Kamalchand Nathimal Lunia V/s ITO in ITA No.
436/Ahd./2013 (lTAT Ahmedabad)
IV. Sh. Sanjay Ashok Jain in ITA No. 4185/Mum/2015 and
ITA No. 4186/Mum/2015 (lTAT Mumbai)
V. Santlal Gupta in ITA No. 2802 (Mum/20B (ITAT
Mumbai) Kantadevi Gupta in ITA No. 2829/Muml2016
VI. Sudhir Balraj Jumani HUF ITA No. 1570/Ahd/2012
(ITA Ahd.)
VII. Disha N. Dalwani ITA No. 6398/Mum/2012 ITAT
Mumbai.
36
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
VIII Zakrullah Choudhary, Pimpri V/s ACIT in ITA No.
669/PN/2012 DATED 18/02/2014.
3.15. Keeping in view the aforesaid factual and legal
position, the addition made by the Assessing Officer is
confirmed. These grounds of appeal are dismissed.
3.16. During the course of appellate proceedings it
was noted that the actual sale proceeds received by the
appellant during the year was Rs. 19,51,357/- against
which the appellant had claimed cost of acquisitions of Rs.
12,000/- and shown the amount of Rs.19,39,357/- as LTCG.
In view of the fact that the transaction was accommodation
entry, the whole of sale proceeds amounting to Rs.
19,51,357/- should have been added to the total income of
the appellant. Accordingly, Notice u/s 251 of the IT Act
dated 26.02.2018 was issued to the appellant and was
asked to explain why the purchase cost of Rs. 12,000/-
allowed by the AO as deduction may not be added to the
total income and the income may not be enhanced
accordingly. No reply has been filed by the appellant.
3.17. With regard to the facts of this issue it is
evident that the appellant has received Rs. 19,51,357/- as
accommodation entry during the year. Any expenditure
37
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
claimed to have been incurred in the earlier years is
therefore not genuine and cannot be claimed and allowed
as expenditure during the current year. The addition made
by AO is accordingly enhanced to Rs.19,51,357/-.
3.18. In the result the appeal of the appellant is
dismissed with enhancement as above."
6. Ld. Counsel for the assessee reiterated the
submissions made before the authorities below and
submitted that an inquiry conducted in the cases of other
assessees and statements referred to by the AO in the
assessment order have not been confronted to the assessee.
The assessee has not been named by any of these persons
for indulging in taking accommodation entries. He has,
therefore, submitted that such evidence cannot be read in
evidence against the assessee and relied upon the decision
of the Hon'ble Supreme Court in the case of Kishan Chand
Chela Ram 125 ITR 713 (SC). He has submitted that for
claiming exemption u/s 10(38) of the Act, the assessee shall
have to prove twin conditions i.e. the income arise from the
38
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
transfer of long term capital asset and being equity share in
a company where the transfer of sale of such equity share
is entered into on or after the date of which Chapter-VII of
the Finance Act, 2004 comes into force and such transaction
is chargeable to security transaction tax under that
Chapter. In the case of the assessee, both twin conditions
are satisfied. He has filed copy of the shares certificate with
transfer form, copy of debit note issued by Shreeji Broking
(P) Ltd., copy of cash receipt of Shreeji Broking (P) Ltd., copy
of ledger account of Indus Portfolio (P) Ltd., copy of form for
evidence for payment of securities transaction tax on
transaction entered in a recognized stock exchange and
copy of the bank statement of the assessee in the Paper
Book. He has further submitted that on identical facts, ITAT
SMC Bench, Delhi in the case of Meenu Goel vs ITO in ITA
No.6235/Del/2017 for AY 2014-15 vide order dated
19.03.2018 relying upon the decision of Hon'ble Punjab &
Haryana High Court in the case of Pr.CIT vs Prem Pal
Gandhi in ITA No.95-2017 vide order dated 18.01.2018,
39
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
allowed the claim of the assessee. The findings of the
Tribunal in para 6 to 8 are reproduced as under:-
6. "I have heard both the parties and perused the
relevant records available with me, especially the orders of
the revenue authorities and the case law cited by both the
parties. I note that assessee has earned Long Term Capital
Gain amounting to Rs. 18,46,600/- during the financial
year 2013-14 and the same has been claimed exempt under
Section 10(38) of Income Tax Act, 1961. The assessee had
purchased of 45,000/- shares of Unisys Software Holding
Industries Ltd amounting Rs. 9,38,600/- at a premium of
Rs. 20.85 per share in physical form. Out of the aforesaid
45000/- Shares assessee sold of 8000 Shares only i.e.
17.77%. Thus, the major part of the Shares i.e. 82.33% are
still in the hand of the assessee. In my view the the assessee
just wanted to enter into the transaction to earn exempted
capital gain, but the assessee did not sell all the share 45000
shares instead of sale of a part i.e. 8000 shares only when
that time was the best price ever. All the transaction were
made through account payee cheque / banking channel
and assessee had purchased share in financial year 2009-10
and sold the same in the financial year 2013-14 resulting in
Long Term Capital Gain. The assessee has submitted
40
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
various documentary evidences to prove the genuineness
of the transaction of sale and purchase of shares which
includes a copy of purchase bill dated 22.02.2010; a copy of
share transfer form in the favour of the assessee; Copy
of bank statement highlighting the payment made against
the share purchased; Transaction statement of the stock
broker i.e. Pace Stock Broking Services (P) Ltd., account;
copy of bank statement in which sale proceed from the sale
of shares received; copy of calculation of long term capital
gain, which was not faulted by the AO. However, the
lower authorities have not considered the aforesaid
documents and rejected all the claims made by the assessee
by relying on the report of the Investigation Wing and
thereby made the addition, which is not sustainable in the
eyes of law. I further find that the AO has given detailed
explanation in the order regarding the modus operandi of
bogus LTCG scheme but failed to substantiate how the
assessee fell in the purview of the same without bringing
any material on record and proving that the assesssee was
directly involved in the so called bogus transaction. I
further note that the addition in dispute made by the AO
and upheld by the Ld. CIT(A) u/s 68 as unexplained credit
instead of long term capital gain as claimed by the assessee,
41
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
however, the source identity and genuineness of the
transaction having been established by documentary
evidences and there is no case for making addition u/s 68
of the Act, hence, the same deserve to be deleted. I note
that in most of the case laws of the Hon'ble High Courts
referred by the Ld. DR the reason on the basis of addition
was confirmed was that the assessee had not tendered
cogent evidence with regard to share transaction,
however, in the present the case assessee has submitted all
the documents / evidences, therefore, the case laws relied
by the Ld. DR are based on distinguished facts and
circumstances, hence, the said case laws are not applicable
in the present case. However, in my considered opinion,
the issue in dispute is squarely covered by the various
decisions of the ITAT and the Hon'ble High Courts
including the recent decision dated 18.1.2018 of the
Hon'ble High Court i.e. Hon'ble High Court of Punjab &
Haryana in the case of PCIT (Central), Ludhiana vs. Prem
Pal Gandhi passed in ITA No. 95 of 2017.
Decision dated 18.1.2018 of the Hon'ble High Court of
Punjab & Haryana in the case of PCIT (Central), Ludhiana
vs. Prem Pal Gandhi passed in ITA No. 95 of 2017 wherein
it has been held as under:-
42
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
"2. The following questions of law have been raised:-
(i) Whether on the facts and in the circumstances
of the case, the Hon'ble Income Tax Appellate
Tribunal has erred in upholding the order of
the CIT(A) deleting the addition of Rs.
4,11,77,474/- made by the AO on account of
sham share transactions ignoring an important
aspect that the transaction of shares showing
their purchase price at Rs. 11,00,000/- and sale
consideration at Rs. 4,23,45,295/- within a
period of less than two years / purchases of
shares made in cash not cheque that too before
shares got dematerialized / worth of the
company at the time of purchase / sale of
shares not proved- All suggest non-
genuineness of the said transaction?
(ii) Whether on the facts and in the circumstances
of the case, the Hon'ble Income Tax Appellate
Tribunal has erred in law in upholding the
order of the CIT(A) deleting the addition of Rs.
4,11,77,474/- made by the AO on account of
sham share transactions, whereas the CIT(A)
himself had held that the assessee had not been
43
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
able to substantiate the source of investment of
Rs. 11,00,000/- in the said shares purchased
during the financial year 2005-06 and the AO
was directed to reopen the case of the assessee
for the assessment year 2006-07 on this issue?
(iii) Whether the Hon'ble ITAT has erred in
ignoring an important aspect that in such cases
of sham transactions of shares showing
abnormal hike in their value, where the facts
themselves speak loud and clear, the AO is
justified to even draw an inference from the
attendant circumstances?
(iv) Whether on the facts and in the circumstances
of the case, the Hon'ble Income Tax Appellate
Tribunal has erred in law in upholding the
order of the CIT(A) deleting the addition of Rs.
12,59,000/- made by the AO on the basis of
seized document on the grounds that the AO
has not pointed out as to how the figures of Rs.
12.59 lacs has been worked out ignoring the
fact that the assessee himself in his reply to the
AO had tried to explain the source of the
receipts of Rs. 12,59,000/- instead of
44
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
challenging the working out of the said figure
by the AO?
3. The first three questions of law raised in this
appeal are covered against the appellant by an order
and judgment of a Division Bench of this Court dated
16.02.2017 in ITA-18-2017 titled as The Pr.
Commissioner of Income Tax (Central), Ludhiana vs.
Sh. Hitesh Gandhi, Bhatti Colony, Chandigarh Road,
Nawanshahar.
4. The issue in short is this : The assessee
purchased shares of a company during the
assessment year 2006-07 at Rs. 11/- and sold the
same in the assessment year 2008-09 at Rs. 400/- per
share. In the above case, namely, ITA 18-2017 also the
assessee had purchased and sold the shares in the
same assessment years. The AO in both the cases
added the appreciation to the assessees' income on
the suspicion that these were fictitious transactions
and that the appreciation actually represented the
assessee's income from undisclosed sources. In ITA-
18-2017 also the CIT(Appeals) and the Tribunal held
that the AO had not produced any evidence
whatsoever in support of the suspicion. On the other
45
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
hand, although the appreciation is very high, the
shares were traded on the National Stock Exchange
and the payments and receipts were routed through
the bank. There was no evidence to indicate for
instance that this was a closely held company and
that the trading on the National Stock Exchange was
manipulated in any manner.
5. In these circumstances, following the
judgment in ITA-18-2017, it must be held that there
is no substantial question of law in the present
appeal.
6. Question (iv) has been dealt with in detail by
the CIT(A) and the Tribunal. Firstly, the documents
on which the AO relied upon the appeal were not put
to the Assessee during the assessment proceedings.
The CIT(A) nevertheless considered them in detail
and found that there was no co-relation between the
amounts sought to be added and the entries in those
documents. This was on an appreciation of facts.
There is nothing to indicate that the same was
perverse or irrational. Accordingly, no question of
law arises.
7. In the circumstances, the appeal is dismissed."
46
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
7. Keeping in view of the facts and circumstances of the
case as explained above and respectfully following the
precedent, as aforesaid, the addition amounting Rs.
18,46,600/- made by the AO and confirmed by the Ld.
CIT(A) is hereby deleted and ground raised by the assessee
is allowed.
8. In the result, the appeal of the assessee is allowed."
6.1. He has, therefore, submitted that the issue
is covered in favour of the assessee by above decision.
The assessee entered into genuine transaction,
therefore, no addition u/s 68 of the Act be made
against the assessee.
7. On the other hand, Ld. Sr. DR relied upon the
orders of the authorities below.
8. I have heard the rival submissions and perused
the material available on record. The assessee placed
sufficient documentary evidences before the AO which
are copy of the shares certificates with transfer form,
copy of debit note issued by Shreeji Broking (P) Ltd.,
47
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
copy of cash receipt of Shreeji Broking (P) Ltd., copy
of the account statement of the assessee in the books
of the broker, copy of ledger account of Indus Portfolio
(P) Ltd., copy of evidence for payment of securities
transaction tax and copy of the bank statement of the
assessee to show that the assessee had entered into
genuine transaction of purchase of share which were
later on sold through the broker on recognized stock
exchange after payment of STT. The claim of the
assessee for sale of shares has been supported by the
documentary evidences which have not been rebutted
by the authorities below. Whatever inquiry was
conducted in the cases of other parties and statement
recorded of several persons namely Sh. Anil Khemka,
Sh. Sanjay Vohra and Sh. Bidyoot Sarkar as referred
in the assessment order and the report of the
Investigation Wing were not confronted to the
assessee and above statements were also not subject
to cross-examination on behalf of the assessee.
48
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
Therefore, such evidences cannot be read in evidence
against the assessee. The order of the SEBI was also
not confronted to the assessee. AO did not mention
any such fact in assessment order. More so in those
reports and statements, the name of the assessee has
not been referred to. Ld. Counsel for the assessee,
therefore, rightly contended that the twin conditions of
section 10(38) of the Act have been satisfied in the
case of the assessee. The assessee has been able to
prove that she has entered into the genuine
transaction of purchase and sale of shares and the
sale consideration is received from broker through
banking channel. The brokers have not denied the
transaction with the assessee. The assessee rooted
the transaction of sale of shares through recognized
stock exchange after making payment of STT. In
similar circumstances, ITAT SMC Bench, Delhi in the
case of Meenu Goel vs ITO (supra) following the
decision of Jurisdictional Hon'ble P&H High Court in
49
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
the case of Pr.CIT vs Prem Pal Gandhi (supra) deleted
the similar addition. Therefore, the issue is covered in
favour of the assessee by the order of ITAT, Delhi
Bench in the case of Meenu Goel vs ITO (supra)
followed by judgement of Jurisdictional P&H High
Court which is binding. There is no other material
available on record to rebut the claim of the assessee
of exemption claimed u/s 10(38) of the Act.
9. Keeping in view of the above discussion and the
material on record, in the light of the order of the
Tribunal in the case of Meenu Goel vs ITO (supra), I set
aside the orders of the authorities below and delete
the addition of Rs.19,51,357/-. The appeal of the
assessee is, accordingly, allowed.
10. In the result, the appeal of the assessee is
allowed."
6. Learned Counsel for the Assessee has taken me to
various documents in the paper book as referred to above which
50
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
specifically prove the purchase of shares made by assessee
genuinely which were also sold genuinely. The transactions
were carried through Demat account and banking channel on
which STT has been paid by assessee. The report of the SEBI
was not adverse in nature against the assessee because name
of the assessee did not appear therein for conducting dubious
transaction. The report of the Investigation Wing and other
material was not confronted to assessee, therefore, the same
cannot be read in evidence against the assessee. More so, the
general enquiry conducted about modus operandi without
verifying bogus long term capital gains could be indicated to
take action against some of the assessees. A specific query and
material against the assessee should have been brought on
record to put assessee under liability. However, in the present
case, the entire documentary evidence on record have not been
disputed by the authorities below and there is no rebuttal to the
explanation of assessee. No adverse material have been brought
on record against the assessee. Further, no proper enquiry have
been conducted by the A.O. on the documentary evidences filed
51
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
by assessee. Whatever statements have been referred to in the
order were general in nature with whom assessee did not have
any transaction. Learned Counsel for the Assessee heavily relied
upon the order of ITAT, Delhi in the case of Meenu Goel vs. ITO
(supra) and Judgment of Punjab & Haryana High Court in the
case of Pr. CIT vs. Prempal Gandhi (supra). Both the decisions
have been considered in the case of Smt. Shikha Dhawan vs.
ITO (supra) reproduced above. Considering the totality of the
facts and circumstances of the case and following the reasons
for decision in the case of Smt. Shikha Dhawan vs. ITO (supra),
I hold that assessee has entered into genuine transaction of sale
and purchase and therefore, satisfied the conditions of Section
10(38) of the I.T. Act. The assessee is entitled for exemption
under the same provision. I, accordingly, set aside the orders of
the authorities below and delete the addition of Rs.47,66,264/-
Appeal of assessee is allowed.
7. In the result, Appeal of assessee is allowed.
52
ITA.No.389/Del./2018 Smt. Sunita
Khemka, New Delhi.
Order pronounced in the open Court.
Sd/-
(BHAVNESH SAINI)
JUDICIAL MEMBER
Delhi, Dated 02nd August, 2018
VBP/-
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT `SMC' Bench, Delhi
6. Guard File.
// BY Order //
Assistant Registrar : ITAT Delhi Benches :
Delhi.
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