Income Tax Appellate Tribunal - Delhi
Puja Gupta, New Delhi vs Ito, Ward- 16(1), New Delhi on 2 April, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHE 'F', NEW DELHI
Before Sh. Bhavnesh Saini, Judicial Member
And
Sh. N. S. Saini, Accountant Member
ITA No. 6890/Del/2018 : Asstt. Year : 2014-15
Puja Gupta, Vs Income Tax Officer,
504, Prakash Deep Building, Ward-16(1),
7, Tolstoy Marg, New Delhi
New Delhi-110001
(APPELLANT) (RESPONDENT)
PAN No. AAJPG1332J
Assessee by : Sh. Salil Aggarwal, CA,
Sh. Shailesh, Sanjeev, CA, &
Sh. Madhur Aggarwal, Adv.
Revenue by : Sh. Surender Pal, Sr. DR
Date of Hearing : 28.03.2019 Date of Pronouncement : 02.04.2019
ORDER
Per N. S. Saini, Accountant Member:
Thi s i s an appeal filed by the assessee agai nst the orde r of Commi ssi oner of Income Tax ( Appeal s)-6, New Del hi dated 18.09.2018.
2. The assessee has rai sed the foll owi ng grounds of appeal :
"A. That the learned CIT (Appe als) has erre d in upholding the addition of Rs. 1,69 ,12,820/- made to the taxable income of the a ssesse e by the Assessing Officer on the allegati on of unexplained cash credit u/s 68 of the Act.
B. That the lea rned C IT (Appe als) has e rred in holding that the onus to prove the source of funds 2 ITA No. 6890/Del/2018 Puja Gupta amounting to Rs.1,69,12,820/- was not discharge d by the assessee.
C. That the learned CIT (Appeals) has further erred in holding that the documents submitted as evidence by the assessee to prove the genuineness of transactions a re a smoke screen to cover up the true nature of the transactions.
D. That the learned CIT(Appeals) has erred in drawing adverse inference against the assessee merely on the basis of general modus ope randi of certain pe rsons with whom the a ssessee has never transacted and with whom no connection or nexus was proved or brought on record by the Assessing Officer.
E. That the addition made by the Assessing Officer and upheld by the learned CIT ( Appeals) i s ba sed merely on suspicion, surmises an d conjectu res and that the learned CIT (Appeals) ou ght to have deleted the addition made.
F. That the learned CIT (Appe als) has erre d in upholding the addition of Rs.5,07,385/- made by the Assessing Officer on the allegation of unexplained expenditure u/s 69 of the Act eve n when there is no material brought on record t o show that the assessee has actually incurred t his expenditure or has made any such payment."
3. Si nce, all the grounds of appeal are i nter-connected and facts are common they are bei ng di sposed off together a s under.
4. We have heard the ri val submi ssi ons and perused the orde rs of the l ower authori ti es and materi al s avail abl e on record. In the i nstant case, the assessee purchased 10,00 0 shares of M/s Dhanl eel a Investment & Tradi ng Co. Ltd. (erstwhil e Ratni Investments Company Li mited) on 29.10.2012 of Face Val ue of Rs.10 per share at a premi um of Rs.80 per 3 ITA No. 6890/Del/2018 Puja Gupta share on preferenti al all otment of shares by the company to the assessee. The payment of purchase consi derati on was made by che que 436015 drawn on Syndi cate Bank, I.P. Estate Branch, New Del hi . Thereafter, the assessee recei ved 40,000 Bonus share s i n the Rati o of 1:4 shares on 15.2.2013 from the company. Thus, the total hol di ng of the assessee became 50,000 shares. Further, on 12.10.2013 the share wa s spl i t by the company i nto shares of Face val ue of Rs.2/- per share. Then, the share h ol di ng of the assessee be came of 2,50,00 0 shares of Face val ue of Rs.2/- per share at an avera ge cost of Rs.3.60 per sha re.
5. Out of thi s, the assessee sol d 82,250 shares @ Rs.205 t o Rs.207 per sha re duri ng the peri od from 12.12.2013 to 11.03.2014 and reali sed total sal e consi derati on of Rs.1,69,12,830/-. These sha res were sol d by the assessee through i ts Broker Pee AAR Securi ti es Ltd., New Del hi i n Bombay Stock Exchange on whi ch STT was pai d. In the Return of Income fil ed for the assessment year 2014-15, the assessee showed L ong Term C api tal Gai ns of Rs.1,66,16,726/- (Rs.1,69,12,830 - Rs.2,96,100) and cl aimed the same as exempt under secti on 10(38) of the Act.
6. The Assessi ng Offi cer observed t hat duri ng the Fi nanci al Year 2011-12, the Authori zed & Pai d-up Ca pi tal of M/s Dhanl eel a Investment & Trading Company Li mi ted was Rs.20,00,000/- whi ch substanti ally i ncreased i n the Fi nanci al Year 2012-13 to Rs.9,47,00 ,000/-. Thus, an amount of more than Rs.9 crores wa s col l ected by M/s Danl eel a Investment & Tradi ng Company Li mi ted duri ng Fi nanci al Year 2012-13 by making preferenti al all otment for whi ch no parti cul ar reason 4 ITA No. 6890/Del/2018 Puja Gupta can be deduced from the fi nancial resul ts of the company or any other parameter i n the Annual report or di scl osure made by the company. Thus, the sudden increase i n share capi tal wi thout any cogent reason rai ses a suspi ci on that the i ncrease i s predetermi ned acti on with speci fi c i ntenti on. Further i n the Bal ance Sheet there i s no fi xed Asset or any tangi bl e Asset having value to support that any busi ness acti vi ty was ever conducted by the company.
7. The Assessi ng offi cer observed that the share pri ce of M/s Danl eel a Investment & Tradi ng Company Li mi ted sky rocketed wi thout havi ng any fi nanci al result. The parameters whi ch are essenti al for i ncrease of pri ce of share are not pre sent. In absence of backi ng fi nanci al resul ts i t can be concl uded that the i ncrease i s due to a rti fi ci al increase by ci rcul ar tradi ng of shares formi ng cartel . Thus, the trend observed a bove agai n l ead to the concl usi on that pri ces of the shares of M/s Danleel a Investment & Tradi ng Company limi ted were arti fi ci all y hi ked to create non-genui ne LTCG to the benefi ci ari es.
8. The Assessi ng Offi cer al so obse rved that statements were al so recorded by the i nvesti gation Wi ng i n other ca ses of vari ous brokers, operat ors and e ntry provi ders, who a ccepte d that M/s Danl eel a Investment & Tradi ng Company li mi ted i s a Penny Stock company and the scri p has been used to provi de bogus LTCG to vari ous benefi ci ari es. Sri Anil Khemka's, statement was re corded on 30 .03.2015 before DDIT (Inv), Kol kata and Sri Harshvardhan Kayan's statement was re corde d on 27.01.2015 before DDIT (Inv), Kol kata i n whi ch they have admi tted that the scri pt M/s Danl eel a Investment & Tradi ng Company li mi ted was used to provi de bogus LTCG to vari ous 5 ITA No. 6890/Del/2018 Puja Gupta benefi ci ari es. Thereafter the Asse ssi ng Offi cer after expl aini ng the modus ope randi of bogus LTC G hel d that the transacti ons of the assessee were a sham transacti on and were entered as a col ourabl e devi ce for avoi dance of tax and the recei pt of Rs1,69,12,820/- by way of cheques was nothi ng but unexpl ained Cash Credi ts under secti on 68 of the Act to be taxed @30% under secti on 115BBE of the Income T ax Act , 1961 i n the hands of the assessee.
9. On Appeal , the Commi ssi oner of Income Tax ( Appeal s) confi rmed the orde r of the AO observi ng that the documents submi tted as evi dence to prov e the genui neness of the transacti on are a sm oke screen to cover up the t rue nature of the transacti ons as it i s reveal ed that the purchase and sal e of shares are arranged transacti ons to create bogus profi t i n the garb of LTCG by well organi zed network of entry provi ders wi th the sol e motive to sell such entri es to enabl e the benefi ci ary to account for the undi scl osed i ncome for a consi derati on or commi ssi on.
10. Before us, the Authori zed Repre se ntative of the assessee submi tted that the assessee has fi l ed before the AO and CIT(A) Ledger Account of the assessee in the Books of Share Broker, Statement of Affai rs of the assessee for the Fi nanci al Year 2012-13 & 2013-14, Lette r of Preferenti al all otment of share s by the company M/s Danl eel a Investment & Tradi ng Company li mited dated 29.10.2012 alongwi th the subscri pti on appl i cati on fil ed by the assessee and l etter of i ntimati on of outcome of EOGM to Bom bay Stock Exchange, Letter of all otment of Bonus shares by the Company dated 15.02.2013 al ongwi th the certi fi ed true copy of the resol uti ons passed i n 6 ITA No. 6890/Del/2018 Puja Gupta EOGM by the sharehol ders of the company, Letter i nti mati ng Sub-di vi si on of Equi ty Shares of the company date d 15.10.2013 al ong wi th the proceedi ngs of the AGM of the Company hel d on 11.09.2013, Bank Statement showi ng payment of purchase consi derati on dated 29.10.2012, C ontract notes for tradi ng i n shares of M/s Danl eel a Investment & Tradi ng Company li mi ted, Demat Statement from Pee Aar Securi ti es Ltd. from 01.04.2012 to 20.12.2016 , i ndi cati ng the movement of shares of M/s Danl eel a Investment & Tradi ng Company l imi ted, Statement showi ng Vol ume and pri ce movement i n shares of M/s Dan l eel a Investment & Tradi ng Company li mi ted from 01.04.20012 to 31.12.2016, Bank statement showi ng reali sati on of sal e proceeds of M/s Danl eel a Investment & Tradi ng Company l imi ted duri ng 2013-14, Bank Statement of Share Broker, Annu al Accounts of M/s Danl eel a Investment & Tra di ng Company l imi ted for the Fi nanci al Years 2011-12, 2012-13 and 2013-14. The copi es of all these documents are pl aced i n the paper Book fi led before the Tri bunal at page Nos 30 t o 274. No defect i n these evi dences has been poi nted by the AO as well the Commi ssi oner of Income Tax (Appeal s).
11. Further, the re asons gi ven by AO as wel l as the Commi ssi oner of Income Tax (Appeal s) that i ncrease i n the share capi tal of M/s Danl eel a Investment & Tradi ng Company li mited wi thout any backing of t he Fi nanci al Resul ts of the company may at best give ri se to suspi ci on whi ch requi res deeper i nvesti gati on of the matter. But suspi ci on al one cannot be the basi s to treat the LTCG of the assessee as not genui ne.
7 ITA No. 6890/Del/2018Puja Gupta It was further argued that the AO has rel i ed on the statement of two share Broke rs namel y, Sri Anil Khemka and Sri Harshvardhan Kayan who were exami ned by DDIT(Inv), Kol kata wi th whom the assessee di d not have any transacti on. Further, the statements of these share brokers were not made avail abl e to the assessee. Still further the assessee had asked for a cross exami nati on of the share brokers wh ose statement has been used a gai nst the assessee whi ch was not all owed to the assessee and therefore thei r statements cannot be rea d agai nst the assessee and pl aced reli ance on the deci si on of the Hon'bl e Supreme court in the case of ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II re ported i n 2015 (10) TMI 442 - SUPREME COURT
12. On the other hand, the DR rel i ed on the orders of the Lower authori ti es and submi tted the matter may be remanded to the Assessi ng Offi cer for all owing Cross exami nati on of the Broke rs an d for thi s he pl aced rel i ance on the deci si on of the Hon'bl e Supreme Court i n the case of ITO Vs Pi rai Choodi 334 ITR 262(SC)
13. We fi nd that the transacti on of th e assessee of pu rchase of shares of M/s Dhanl eel a Investment & Tradi ng Co. Ltd., hol di ng of the shares f or m ore th an one year and the sal e of shares through a regi stered sha re broke r i n a recogni zed St ock Exchange and payment of Securi ti es Transacti on Tax thereon, all are supported by documentary evi dences whi ch were pl aced before the l ower authori ti es. The Revenue by maki ng enqui ry i n respect of the same coul d not poi nt out any specifi c defect therei n.
8 ITA No. 6890/Del/2018Puja Gupta
14. In our consi dered vi ew, effect of a transacti on whi ch i s supported by documentary evi dences cannot be brushed asi de on suspi ci on or probabi li ties wi thout poi nti ng out any defect therei n.
15. In the i nstant case, the Assessi ng Offi cer himsel f observed that the i ssue of preferenti al shares by M/s Dhanl eel a Investment & Tradi ng Co. Ltd. rai ses a suspi ci on. The movement in pri ce of sha res of that company was wi thout backi ng of fi nanci al performance of that company.
16. In our consi dered vi ew, the above at best are a poi nter or cause for ca reful scruti ny of the transacti on by the Assessi ng Offi cer but from thi s i t cannot be concl uded that transacti ons were sham. It i s a matter of com mon knowl edge that pri ces of shares i n the share market depends upon i nnumerabl e factors and percepti on of the i nvestor and not al one on the fi nanci al performance of the company.
17. In the i nstant case, the assesse e poi nted out that the financi al performance of the sai d company i mproved a l ot i n the fi nanci al year 2012-13 compared to fi nanci al year 2011-12. It was poi nted out that i n the fi nanci al year 2012-13, the total Revenue of the company i ncrea sed to Rs.1719 l akhs from Rs.10.25 l akhs. Further, the company wi tnessed a turn around and secured net profi t of more than Rs.31 l akhs as compared to l oss i n the immedi atel y precedi ng year. Thus, the busi ness of the company i ncreased a round 171 ti mes whi ch shows that the Assessi ng Offi cer was not correct in stati ng that no busi ness acti vity was conducted by the company an d al so i ncorrect in stati ng that the i ncrease in share pri ce was 9 ITA No. 6890/Del/2018 Puja Gupta wi thout any i ncrease i n fi nanci al performance of the company . Thus, we fi nd that the transa cti on of the assessee w as consi dered as sham by the Asse ssi ng Offi cer wi thout proper materi al or anal ysi s of the financi al s of the company.
18. Further, the Assessi ng Offi cer also drawn support from the i nvesti gati on report of the Kol kata Investi gati on Wing and the statements of two share broke rs, namel y, Sh. Anil Khemka and Sri Harshvardhan Kayan.
19. The l d. Departmental Representative coul d not controvert the submi ssi on of the assessee that the sai d i nvesti gati on report and the statements of the share broke rs were prepare d or recorded at the back of the assessee and the assessee was not provi ded wi th the copy of the same and was not al l owed any opportuni ty to cross exami ne the brokers. Ld. DR fil ed report of Assessi ng Offi cer wherei n it is admi tted that statement of Sh. Ani l Khemka was not suppl i ed to assessee, so where i s questi on of al l owi ng cross exami nati on to the same statement. In the above ci rcumstances, i n our consi dered vi ew, the sai d report or statement coul d not be used agai nst the assessee. The deci si ons reli ed upon by the l d. Departmental Representati ve are not appli cabl e to the facts of the case.
20. Even, otherwi se al so, we fi nd that no reference to the transacti on of the assessee coul d be poi nted out by the Revenue whi ch was i n the sai d report or sai d statements. Thus, the sai d report or statements w as not i n respect of speci fi c transacti on of the assessee. The assessee transacte d through share broker, namel y, Pee AAR Se curi ti es Ltd. and not through Shri Anil Khemka and Sri Harshvardhan Kayan.
10 ITA No. 6890/Del/2018Puja Gupta
21. Si mpl y, because in the shares of M/s Dhanl eel a Investment & Tradi ng Co. Ltd. some mani pul ati on was made by few persons i t cannot be concl uded that all the transacti ons whi ch took pl ace i n the shares of the sai d company were mani pul ated and all the persons who transa cted i n the shares of the sai d company i ndul ged in sham transacti on. The Revenue has brought no materi al on record to sh ow that the assessee actual l y i ndul ged i n some mani pul ati on and pai d cash i n li eu of cheque recei ved agai nst sal e of shares.
22. Duri ng the course of heari ng, before us, the Departmental Representati ve contended that SEBI has ba rre d deal ing in shares of M/s Dhanl eel a Investment & Tradi ng Co. Ltd. However, Authori zed Representati ve of the assessee contended that no such ban has been imposed. The Depa rtmental Representati ve i n support of hi s contenti on fil ed copy of SEBI orde r dated 19.12.2014. However, a perusal of the sai d order, parti cul arl y para no. 32 at page 16 shows that amongst others M/s Dhanl eel a Investment & Tradi ng Co. Ltd. was prohi bi ted till the fi nal order f rom de ali ng in shares of Radford Gl obal Ltd. Thus, i t i s observed that the sai d orde r has not prohi bited any person from deal i ng i n shares of M/s Dhanl eel a Investment & Tradi ng Co. Ltd.
23. The assessee pl eaded that subst anti al shares were sti ll retai ned by assessee a s al l shares were n ot sol d whi ch shows bonafi de of assessee that she entered i nto genuine transacti on. Thus, pri nci pl e of preponderance of probabi li ti es will not appl y to the case.
11 ITA No. 6890/Del/2018Puja Gupta
24. In the above facts and ci rcumst ances, we fi nd that the transacti on of the assessee of de ri ving l ong term capi tal gai ns of Rs.1,69 ,12,820/- by sel ling shares of M/s Dhanl eel a Investment & Tradi ng Co. Ltd. was treated as bogus by the Revenue onl y on the basi s of suspi ci on and probabi li ty and wi thout fi ndi ng any defect in the vari ous documentary evi dences fil ed by the assessee.
25. As transacti on of the assessee are supported by the rel evant documentary evi dences, the addi ti ons made by the Assessi ng Offi cer of Rs.1,69,12,820/- by treati ng the sal e transacti on as bogus i s unsustainabl e. We, therefore, del ete the addi ti on of Rs.1,69,12,820/-.
26. As we fi nd the transacti on of l ong term capi tal gains of Rs.1,69,12,820/- de ri ved by the assessee as genui ne and correct further addi ti on of Rs.5,07,385/- made by the Assessi ng Offi cer i s al so li abl e to be del eted and accordi ngly, the same i s hereby del eted.
27. In the resul t, the appeal of the assessee i s all owed. (Orde r Pronounced i n the Open Court on 02/04/2019) Sd/- Sd/-
(Bhavnesh Saini) (N. S. Saini)
Judicial Member Accountant Member
Dated: 02/04/2019
*Subodh*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR