Income Tax Appellate Tribunal - Mumbai
Nirav Shailendra Mody, Mumbai vs Ito-19(2)(4), Mumbai on 9 September, 2024
| आयकरअपीऱीयअधिकरणन्यायपीठ,मुंबई| IN THE INCOME TAX APPELLATE TRIBUNAL "(SMC)" BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON'BLE ACCOUNTANT MEMBER & SHRI SUNIL KUMAR SINGH, HON'BLE JUDICIAL MEMBER I.T.A. No.1039/Mum/2024 (Assessment Year:2014-15) Nirav Shailendra Mody, ITO, 8/A Navjeevan Patel Compound, Vs 19(2)(4), 20 Napean Sea Road, Mumbai Mumbai [PAN: AAFPM3474R] अपीऱार्थी/ (Appellant) प्रत्य्र्र्थी/ (Respondent) Assessee by : Shri Mohan Tandon Revenue by : Shri R. R. Makwana, Sr. DR सुनवाई की तारीख/ Date of Hearing : 05.09.2024 घोषणा की तारीख / Date of Pronouncement: 09.09.2024 आदे श/O R D E R PERNARENDRA KUMAR BILLAIYA, AM This appeal by the assessee is preferred against the order dated 10.01.2024of ld. NFAC, Delhipertaining to Assessment Year 2014-15.
2. The grievance of the assessee reads as under:-
"1. On the facts and in the circumstances of the case the Ld. CIT(A) NFAC has grossly erred in confirming the addition of Rs. 2235160/- made in the assessment completed u/s 143(3) by the AO by disallowing long term capital gain income claimed exempt u/s 10(38) by taxing the entire sale proceeds fron from sale of shares, as unexplained income u/s 68 of the IT Act 1961, without any basis and with the sole purpose to make additions without bringing on record any corroborative material found during the course of assessment proceedings, and also by completely ignoring the well established law that no addition can be made solely on the basis of statements recorded on oath during the course of survey conducted just on the basis of information received from Investigation Wing of Income Tax, Kolkata, without making its own independent enquiry and efforts.
I.T.A. No. 1039/Mum/2024 Nirav Shailendra Mody 2 Thus, the additions made solely on the basis of such retracted statements deserve to be deleted.
1.1That, the Ld. CIT (A) NFAC has grossly erred in confirming the addition made in the assessment completed u/s 143(3) solely on the basis of statements of Shri Anil Agarwal recorded by I.T. Officials after giving summons u/s 131 of the I.T. Act 1961 during the course of search operations carried out on the entry providers and survey conducted on the broking houses in Kolkata, by the Income Tax Officials. And also no opportunity of cross examining Shri Anil Agarwal was provided. Thus, the assessment order deserves to be held bad in law and the additions made there under deserve to be deleted.
2. On the facts and in the circumstances of the case the Ld. CIT(A) NFAC has grossly erred in confirming the disallowance of claim of long term capital gain claimed exempt u/s 10(38) amounting to Rs. 2147685/-, as unexplained income u/s 68 of the I. T. Act 1961, as the provisions of section 68 are applicable only when the assessee is maintaining books of accounts and in the present case assessee is a partner in a firm and having income from other sources only. Thus, the additions confirmed by the Ld. CIT (A) NFAC by applying the provision of section 68 is bad in law and deserves to be deleted.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) NFAC has grossly erred in making addition of Rs. 44703/- U/s 69C on presumptions and assumptions @ 2.00% of transaction amount of long- term capital gain, without any basis and without establishing the as to how the amount has been paid to the broker. Thus additions made without any basis just on presumptions and assumptions is bad in law and deserves to be deleted.
4. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal."
3. Briefly stated the facts of the case are that the assessee filed his return of income on 15.09.2014 declaring income of Rs. 7,24,390/-. The return was processed u/s 143(1) of the Act. Later on, on the basis of information received from the Directorate of Income Tax (Investigation), Kolkata stating that the investigation carried out by the department has proved that a scheme was hatched by various players to obtain/ provide I.T.A. No. 1039/Mum/2024 Nirav Shailendra Mody 3 accommodation entries bogus long term capital gain (LTCG) through manipulation of stock market.
4. On perusal of the record of the assessee the AO found that the assessee has return LTCG on sale of shares of Sunrise Asian and has claimed exemption u/s 10(38) of the Act. Drawing support form the report of the Investigation Wing, Kolkata the AO treated the long term capital gain of Rs. 21,47,685/- as bogus and rejecting the claim u/s 10(38) of the Act. The AO made addition of Rs. 22,35,160/- and made further addition of Rs. 44703/- being 2% commission paid to the entry operators.
5. The assessee carried the matter before the ld. CIT(A) but without any success. Before us at the very outset the counsel pointed out that on identical set of facts the coordinate bench in the case of the brother of the assessee has deleted the impugned addition. The counsel supplied the copy of the order of the coordinate bench. Per contra the ld. DR strongly supported the findings of the AO but could not bring any distinguishing decision in favour of the revenue.
6. We have given a thoughtful consideration to the orders of the authorities below. We find force in the contention of the counsel on identical set of facts and on identical transactions in identical scrip the coordinate bench had considered the identical issue in the case Sanket Shailendra Modi in ITA No. 1780/Mum/2022. The relevant finding reads as under:-
"6. At the outset, we find that the documentary evidences submitted by the assessee were found to be genuine and no adverse inferences were drawn by the revenue on the same. The transactions were carried out by the assessee in the I.T.A. No. 1039/Mum/2024 Nirav Shailendra Mody 4 secondary market through a registered share broker at the prevailingmarket prices. Payments were received by the assessee by account payee cheques from the stock exchange through the registered broker. Amounts received on sale of shares were duly subjected to levy of Securities Transaction Tax (STT) at the applicable rates.
6.1. We find that no enquiries were carried out by the revenue either on the broker or with the stock exchange with regard to transactions carried out by the assessee. The revenue had merely relied on the Kolkata investigation report without linking the assessee with the various allegations leveled in the said investigation report.
6.2. We find that the revenue had not proved with any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators, promoters of Sunrise Asian Ltd and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators.
6.3. It is not in dispute that the assessee had made purchase of shares in off- market. Now the next issue that arises for our consideration is as to whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham. In our considered opinion, the transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so, when there is no dispute regarding the purchase price and sale price of shares. Our view is furtherfortified by the decision of Hon'ble Jurisdictional High Court vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom). in the case of CIT 6.4. We find that independent enquiries were conducted by Securities and Exchange Board of India (SEBI in short) and SEBI had passed a separate order in respect of the said scrip in which assessee had dealt. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries. The assessee's name or the broker through whom the assessee bought and sold the shares does not figure in the said list in the order of SEBI. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX I.T.A. No. 1039/Mum/2024 Nirav Shailendra Mody 5 6.7. Hence the entire addition has been made merely by placing reliance on the Kolkata Investigation Wing report which are more general in nature and does not implicate the assessee herein in any manner whatsoever. We are unable to persuade ourselves to accept to the contentions of the Id. DR that Kolkata Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee or his broker is not one of the parties who had been proceeded against by SEBI, the transaction carried out by the assessee cannot be termed as bogus.
6.8. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the Id. AOmerely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus. In our considered opinion, the Id. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the Id. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of ours is further fortified by the decision of Hon'ble Delhi High Court in the case of PCIT vs Laxman Industrial Resources Ltd in ITA No. 169/2017 dated 14/03/2017. It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition by controverting the documentary evidences furnished by the assessee and by bringing on record cogent material to sustain the addition. No evidence has been brought on record to establish any link between the assessee herein and the directors of Sunrise Asian Limited or any other person named in the assessment order being involved in any price rigging and also the exit provider. This onus is admittedly not discharged by the revenue in the instant case.
I.T.A. No. 1039/Mum/2024 Nirav Shailendra Mody 6 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 6.11. Considering the totality of the facts and circumstances of the instant case and respectfully following the judicial precedents relied upon hereinabove, we are not inclined to accept to the stand of the Id. CIT(A) in sustaining the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 2% against the same. Accordingly, the grounds raised by the assessee are allowed."
7. While coming to the above conclusion the coordinate bench has considered the following facts :-
Date Event Supporting documents Submitted before AO during assessment proceeding 18.03.2011 Appellant purchased Debit note issued by Yes on 9th shares of sunrise Asian Ltd Shipra Fabrics P Ltd dated October 2017 from Shipra Fabrics Private 18th March 2011 Ltd being an off market purchase in physical form 18.03.2011 Cheque No 689555 drawn Copy of bank statement Yes on 9th on HDFC Bank Favoring for the relevant October 2017 Shipra Fabrics Ltd. cleared transactions by bankers on 19.03.2011 19.03.2011 Receipt issued by Shipra C Copy of receipt Yes on 9th Fabrics Ltd. for October 2017 consideration of 100000/-
11.09.2012 Physical Shares Credited to Copy of Demat statement Yes on 9th
Demat Account of for the period 01.04.2012 October 2017
Appellant with HDFC Bank to 31.03.2013
13.05.2013 to Sale of 5000 shares of Copies of contract notes Yes on 9th
16.05.2013 Sunrise Asian Ltd on BSE for sale of 5000 shares October 2017
platform through Fortune issued by Fortune Equity
Brokers(India) Ltd.
06.06.2013 Transfer of share of Statement of Demat Yes on 9th
Sunrise Asian from HDFC Account at with Intime October 2017
demat account with intime Equities Ltd. es from
equities Ltd 01.01.2011 to 31.03.2014
including the holding
statement as on
31.03.2014
15.05.2013 Debit entries of 5000 Statement of Demat Yes on 9th
shares of Sunrise Asian Ltd Account with Intime October 2017
Equities from 01.01.2010
Ltd to 31.03.2014
I.T.A. No. 1039/Mum/2024
Nirav Shailendra Mody
7
including the holding
statement as on
31.03.2014
21.05.2013 Receipt of sale proceeds Copy of bank statement
from Fortune Equity with HDFC bank showing
Brokers (India) Ltd the receipt on
21.05.2013 Conformation of amount Copy of Ledger Account Yes on 4th
received on sale of shares with Fortune Equity December 2017
from Fortune Equity Brokers (India) Ltd. for the
Brokers (Inc India Ltd. period of 01.04.2013 to
31.03.2014
8. The parity of facts can be seen from the following chart of facts in the case of the assessee:-
Date Event Supporting documents Submitted before AO during assessment proceedings 18/3/2011 Appellant Purchased Shares of Debit Note Issued by Yes on 09th October Sunrise Asian Ltd from Shipra Shipra Fabrics P Ltd 2017 Fabrics Private Limited being an Dated 18th March 2011 Off Market Purchase in Physical Form 18/3/2011 Cheque No 689576 drawn on Copy of Bank Statement Yes on 09th October HDFC BankFavoring Shipra for the relevant 2017 Fabrics P Ltd cleared by bankers transaction on 19/03/2011 19/3/2011 Receipt Issued by Shipra Fabrics P Copy of receipt Yes on 09th October Ltd for consideration of Rs 2017 100000/-
27/06/2011 Physical Shares Credited to Demat Copy of Demat Yes on 09th October
Account of Appellant with Bank statement for the period 2017
Of India 1-1-2011 to 31-3-2013
16/05/2013 Statement of demat Yes on 09th October
Transfer of Shares of Sunrise Asian Account with Intime 2017
from BOI Demat Account to demat Equities Ltd from 1- 1-
account with intime equities 2011 to 31-3- 2014
including the holding
statement as on 31-3-
2014
21/05/2013 Sale of 5000 shares of Sunrise Copies of Contract Yes on 09th October
to Asian Ltd on BSE Platform notes for sale of 5000 2017
28/05/2013 through Fortune Equity Brokers shares issued by
(India) Ltd Fortune Equity Brokers
(India) Ltd
23/05/2013 Debit entries of 5000 shares of Statement of demat | Yes on 09th October
28/05/2013 SunriseAsian Ltd Account with Intime 2017
I.T.A. No. 1039/Mum/2024
Nirav Shailendra Mody
8
30/05/2013 Equities Ltd from 1- 1-
2011 to 31-3- 2014
including the holding
statement as on 31-3-
2014
21/05/2013 Receipt of Sale proceeds from Copy of Bank statement Yes on 22nd
Fortune Equity Brokers (India) Ltd with HDFC bank December 2017
Showing the receipt on
21/05/20213 Confirmation of amount received Copy of Ledger Yes on 22nd
on sale of shares from Fortune Account with Fortune December 2017
Equity Brokers India Ltd. Equity Brokers India
Ltd for the period
1/4/2013 to
31/03/2014
9. On finding parity of facts respectfully following the decision of the coordinate bench (supra) we direct the AO to delete the impugned addition and allow the claim of the assessee u/s 10(38) of the Act.
10. Appeal is allowed.
Order pronounced in the Court on 9th September, 2024 at Mumbai.
Sd/- Sd/- (SUNIL KUMAR SINGH) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 09/09/2024 *AK KEOT, Sr. PS
आदे श की प्रततलऱपऩ अग्रेपषत/Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant
2. प्रत्यथी / The Respondent
3. संफंधधत आयकर आयुक्त / Concerned Pr. CIT
4. आयकर आयक् ु त )अऩीऱ(/ The CIT(A)-
5. पवबागीयप्रतततनधध ,आयकरअपीलीयअधिकरण,मुं बई/DR,ITAT, Mumbai,
6. गार्ड पाई/Guard file.
आदे शानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अऩीऱीय अधधकरण ITAT, Mumbai