Income Tax Appellate Tribunal - Kolkata
Smt. Suman Kothari, Kolkata vs Ito, Ward - 36(2), Kolkata , Kolkata on 10 May, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL "B", BENCH KOLKATA
BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आयकरअपीलसं./ITA No.2467/Kol/2017
(िनधा रणवष / Assessment Year: 2014-15)
Smt. Suman Kothari Vs. ITO, Ward-36(2), Kolkata
9, India Exchange Place, 4 t h
Floor, Room No. 6, Kolkata-
700001
थायीले खासं ./जीआइआरसं ./PAN/GIR No. : AEVPK 0597 H
(Appellant) .. (Respondent)
Appellant by : Shri M.D. Shah, AR
Respondent by :Smt. Madhu Malati Ghosh, Addl. CIT Sr. DR
सुनवाईकीतारीख/ Date of Hearing : 16/04/2019
घोषणाकीतारीख/Date of Pronouncement : 10/05/2018
आदे श / O R D E R
Per Dr. Arjun Lal Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2014-15, is directed against an order passed by the learned Commissioner of Income Tax (Appeals)-10, Kolkata (in short the ld. 'CIT(A)'], which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 ( in short the 'Act'), dated 21.12.2016.
2. The grounds of appeal raised by the assessee are as follows:
1. The ld. CIT(A) was not justified in upholding the addition made by the ld.
A.O. u/s 68 of the Act in respect of sale proceeds of shares of Sulabh Engineering and Services Ltd. amounting to Rs. 1,12,13,010/- treating thesame as income from undisclosed sources after rejecting the assessee's claim of Long Term capital gains (LTCG) on sale of those shares.
S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15
2. The ld. CIT(A) was not justified in upholding the action of the ld. A.O. in treating the transactions in shares of Sulabh Engineering and Services Limited resulting in Long Term Capital Gain as bogus and thereupon making addition u/s 69C on the presumption that commission @0.5% was paid for arranging the aforesaid bogus long Term.
3. The appellant craves leave to add/or amend any grounds of this appeal.
3. The brief facts qua the issue are that the assessee has filed its return of income for the assessment year 2014-15 on 28.11.2014 declaring total income to the tune of Rs. 2,73,050/-. The assessee's return of income was selected for scrutiny u/s 143(2) of the Act. The assessee is engaged in the business of trading in shares and securities during the assessment year under consideration. During the assessment proceedings the Assessing Officer noted that the assessee has earned long term capital gain on sale of shares and claimed exemption under section 10(38) of the Act. The findings of the assessing officer is given below:
"4.During the course of assessment proceedings the assessee was asked to produce the details of share purchased and sold during the year under consideration and again he was requested to explain with supporting evidence that the transaction (s) is/are genuine on 18/11/2016 as he earned LTCG. In response the assessee has filed a submission dated 16/12/2016 which is inter alia as under:
Pa g e | 2 S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15 While verifying computation of income, it is seen that the assessee has shown in his P&L a/c that he has earned long term capital gain of Rs. 1,12,13,010/- and claimed the same as exempt out of total sale proceeds of Rs.1,14,63,010/-. The ld. AR of the assessee was asked to file complete details as well as evidences with respect to such claim of exempt income. The assessee has filed copy of Contract Notes in support of purchase and sale of shares of M/s Sulabh Engineers and Services Ltd. on which long term capital gain was claimed. It is noted from the details / evidence filed that 125000 shares of the company was purchased for Rs. 2,50,000/- on 23/03/2012. Finally, just after completion of one year when the investment in shares became eligible for long term capital gain was computed for Rs.1,12,13,010/-. Thus, it is seen that the assessee has managed an increase of almost 44.85%. In a short span of time of 15-18 months that too when the general market trend was recessive during the relevant period of time.
In the meantime, Directorate of Investigation vide letter dated 03/07/2015 reported that prices of shares of some penny stocks were artificially rigged to benefit some assessee through bogus claim of long term capital gain. It is reported in the said communication that several penny stocks listed on BSE were used by few persons to artificially arrange bogus long term capital gain to avoid taxation on such amount. This report is based on several surveys and search actions conducted by the directorate on Entry operators (companies with huge transactions but having no actual worth) which were used for artificially rigging the price. It is reported that various enquiries has been conducted by the Directorate of Investigation, Kolkata, on a project basis, which has resulted into the unearthing of a huge syndicate of Entry Operators, share brokers and money launderers, involved in providing house accommodation of long term capital gain and short term capital loss. It has come to light that large scale manipulation has been/ is being done in market price of shares of certain companies listed on the Bombay Stock Exchange by certain person working as a syndicate in order to provide entries of tax exempt bogus long term capital gains to large number of persons in lieu unaccounted cash. The basis objective of this racket is to convert black money into white without payment of income tax. The unaccounted cash of such persons (beneficiaries) is utilized to purchase shares of such companies at a very high artificially inflated market price. This practice is generally called Accommodation Entry Scam, as the activities of such persons are carried out with prime objective of accommodating unaccounted cash of beneficiaries into their regular books of accounts without paying any tax on the same.
Pa g e | 3 S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15 Therefore considering the circumstances and the report of the Directorate of Investigation, it was held by the Assessing Officer that the assessee had entered into pre-designed modus of transaction and investment in shares of M/s Sulabh Engineers and Services Ltd. just to convert black money into white in the guise of long term capital gain amounting to Rs.1,12,13,010/-. Therefore, AO made addition to the total income of the assessee to the tune of Rs.1,12,13,010/-.
The assessing officer also noted that share broker charges @ 0.10 to 0. 50 % of cheque amount, hence AO worked out total unexplained expenditure towards commission at Rs. 56,065/- and made addition under section 69C of the Act.
4. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. Aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us.
5. Before us the ld. Counsel for the assessee reiterated the submissions made before the authorities below.
6. On the other hand, the ld. DR for the revenue submitted before us that the AO has rightly made an addition of Rs.l,12,13,101/- as unexplained credit u/s 68 of the Income Tax Act, 1961. After an exhaustive discussion and elaborating the factual and legal matrix, the Ld. AO has held that the claim of Long Term Capital Gain u/s 10(38) was to be denied to the assessee-individual, and was to be assessed as unexplained cash credit u/s 68 of the I T Act. The Ld. AO has placed on record the entire gamut of findings. In his view of the facts there are elaborate and direct evidence to clearly indicate that the entire transactions undertaken by the appellant were merely accommodation entries taken for the purpose of such bogus Long Term Capital Gain made by the assessee during the previous year. It is apparent that, in the grab of alleged LTCG, the assessee "earned" exempt Income of Rs.1,12,13,101/- and huge amount brought into the books without paying a single rupee of tax. The ld DR pointed out that AO has very carefully analyzed the Information received from the Investigation Wing, and has recorded the Pa g e | 4 S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15 noteworthy features of the Company whose shares were purchased/sold by the assessee-Individual. The rise and fall of the prices as recorded had been brought out by the ld. AO to be artificial and not commensurate with the normal market, as the Company had no business at all. The Ld. AO has also brought forth Information that the Regulatory Authority SEBI has also after investigating such abnormal price increases of certain stocks investigated the matter and suspended trading in certain scripts. It is very clear that the prices of these scripts fell sharply after the offloading of these scripts by pre-arranged and manipulated transactions.
The entire transactions were carried out on the stock exchange to give it a color of real transactions. The ld DR pointed out that in these circumstances, the addition made by AO should be suatained.
7. We have heard both the parties and perused the material available on record. We note that the assessee has submitted before us the statement showing purchases and sale of long term capital gain on sale of equity shares (PB-1). The assesseesubmitted allotment advice for 75,000 shares of M/s Sulabh Engineers and Services Ltd. (PB-2). The assessee submitted the bank detail for payment (vide PB-3 to 5). The assessee submitted before us NSDL statement showing preferential allotment of 75000 shares of M/s Sulabh Engineering and Services Ltd. We note that the assessee also submitted extract of resolution passed and screenshot of money control showing splitting of face value from Rs.10 to Rs. 1 of M/s Sulabh Engineering and Services Ltd. (PB-11 to 13). The assessee submitted the NSDL statement showing allotment of 7,50,000 sharesof M/s Sulabh Engineers and Services Ltd. at fair value of Rs. 1 (PB-14 to 17). The balance sheet and profit & loss account along with investment schedule showing 7,50,000 shares of M/s Sulabh Engineers and Services Ltd. for assessment year 2013-14 (PB-18 to 23) were also submitted. The assessee also submitted the sale bill along with contract note from broker for sale of 1,25,000 shares of M/s Sulabh Engineers and Services Ltd. (PB-23 to 46). The broker's statement showing payment made for the sale has also been submitted by the assessee,(vide PB-47 to 59). The bank statement reflecting receipt of sale consideration for sale of 1,25,000 shares of M/s Sulabh Engineers and services ltd is placed in paper book vide,(PB-60 to 63). The Profit & loss account and computation of income for assessment year 2014-15 Pa g e | 5 S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15 (PB-64 to 69) were also placed in the paper book. With help of these plethora documents and evidences, the ld Counsel claimed that long term capital gain on sale of equity shares of Sulabh Engineering and Services Ltd. of Rs. 1,12,13,010/- during the current financial year, is genuine.
8. We note that the assessee has earned long term capital gain on sale of equity shares of Sulabh Engineering and Services Ltd. of Rs. 1,12,13,010/- during the current financial year. During assessment proceedings details and evidences in support of purchase and sale of shares as asked for have been submitted before the learned Assessing Officer from time to time. However, the ld. Assessing Officer has treated the transaction in equity shares of M/sSulabh Engineering and Services Ltd. as bogus and added Rs. 1,12,13,010/- being Long Term Capital Gain on sale of such equity shares only on the basis of his suspicion without bringing any adverse material on record in support of his contention in spite of the fact that the sale transactions have been done through recognized exchange through the authorized broker and all relevant supporting documents have been submitted before the learned Assessing Officer. Further, learned Assessing Officer has also added Rs. 56,065/- on account of undisclosed commission payment @ 0.5% of the Long Term Capital Gain that had been assumed to be incurred to arrange bogus Long Term Capital Gain amounting to Rs. 1,12,13,010/-.
We note that the scrips / equity shares of M/s Sulabh Engineering and Services Ltd. has been dealt with by the SMC Bench of this Tribunal in the case of Vasudha Jain, in ITA No.1018/Kol/2018, for A.Y. 2015-16, order dated 15.02.2019, wherein the SMC Bench of this Tribunal held that addition has been made by AO mainly on the basis of 'suspicion' and 'probability'. No price rigging established by AO. The ld AO as well as ld CIT(A), were guided by the report of the Investigation Wing, which is general in nature and no specific findings for the assessee, and hence based on these facts the SMC Bench deleted the addition, observing the following.
"13. The ld AR also brought to our notice that once the assessee has furnished allevidences in support of the genuineness of the transactions, the onus to disprove the same ison revenue. He referred to the judgement of Hon'ble Supreme Court in the case ofKrishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC Pa g e | 6 S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15 816 (SC). In thiscase the Hon'ble Apex Court held that the burden of showing that a particular transaction isbenami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstancesunerringly and reasonably raising inference of that fact. The Hon'ble Apex Court further held that it is not enough to show circumstances which might create suspicion because thecourt cannot decide on the basis of suspicion. It has to act on legal grounds established byevidence. The ld AR submitted that similar view has been taken in the following judgmentswhile deciding the issue relating to exemption claimed by the assessee on LTCG on allegedPenny Socks.
(i) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT)
(ii) ACIT vs. J. C. Agarwal HUF - ITYA No. 32/Agr/2007 (Agra ITAT)
14. Moreover it was submitted before us by ld AR that the AO was not justified in taking an adverse view against the assessee on the ground of abnormal price rise of the shares and alleging price rigging. It was submitted that there is no allegation in orders of SEBI and/or the enquiry report of the Investigation Wing to the effect that the assessee, the Companies dealt in and/or his broker was a party to the price rigging or manipulation of price in CSE.
The ld AR referred to the following judgments in support of this contention wherein under similar facts of the case it was held that the AO was not justified in refusing to allow the benefit under section 10(38) of the Act and to assess the sale proceeds of shares as undisclosed income of the assessee under section 68 of the Act :-
(i) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT)
(ii) ACIT vs.Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT)
(iii) Lalit Mohan Jalan (HUF) vs. ACIT - ITA No. 693/Kol/2009 (Kol ITAT) (iv) Mukesh R. Marolia vs. Addl. CIT - [2006] 6 SOT 247 (Mum)
15. We note that the ld. D.R. had heavily relied upon the decision of the Hon'ble Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017.
We notethat in the case relied upon by the ld. D.R, we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was donethrough the broker and the address of the broker was incidentally the address of thecompany. The profit earned by the assessee was shown as capital gains which was notaccepted by the A.O. and the gains were treated as business profit of the assessee by treatingthe sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seenthat in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit.
16. It is clear from the above that the facts of the case of the assessee are similar with the facts in the cases wherein the co-ordinate bench of the Tribunal has Pa g e | 7 S mt. S u ma n Ko th a r i ITA No.2467/Kol/2017 Assessment Year:2014-15 deleted the addition and allowed the claim of LTCG on such sale of shares Therefore, respectfully following thesame ratio, I am inclined to set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital as bogus and order to allow the claim of LTCG on sale of share of M/s. SESL and delete the consequential addition."
9. As the issue is squarely covered in favour of the assessee by the decision of the SMC bench of ITAT Kolkata, and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the SMC Bench in the case of Vasudha Jain (supra), we find no reason to interfere in the said order of the SMC Bench of this Tribunal and the same is hereby upheld. Therefore, we delete the addition of Rs.1,12,13,010/- and we also delete the consequential addition on account of unexplained expenditure towardscommission at Rs.56,065/-.
10. In the result, appeal of the assessee is allowed Order is pronounced in the open court on 10.05.2019.
Sd/- Sd/-
(S.S.GODARA) (DR. A.L.SAINI)
ाियकसद / JUDICIAL MEMBER ले खासद / ACCOUNTANT MEMBER
िदनां क Dated 10/05/2019
SB, Sr. PS
Copy of the order forwarded to:
1. Smt. Suman Kothari
2. ITO, Ward-36(2), Kolkata
3. C.I.T(A)- 4. C.I.T.- Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
6. Guard File.
True copy
By Order
Assistant Registrar
ITAT, Kolkata Benches
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