Income Tax Appellate Tribunal - Kolkata
Kiran Kothari Huf, Kolkata vs Ito, Ward 35(3), Kolkata, Kolkata on 15 November, 2017
आयकर अपील
य अधीकरण, यायपीठ - "D" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH: KOLKATA
(सम )Before ी ऐ. ट
. वक , यायीक सद य एवं/and डॉ. अजन
ु$ लाल सैनी, लेखा सद य)
[Before Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
आयकर अपील सं या / I.T.A No. 443/Kol/2017
नधॉरण वषॅ/Assessment Year: 2013-14
Kiran Kothari, (HUF) Vs. Income-tax Officer, Wd-35(3), Kolkata
(PAN: AAGHK 9024 E)
(अपीलाथ*/Appellant) (+,यथ*/Respondent)
Date of Hearing 01.09.2017
Date of Pronouncement 15.11.2017
For the Appellant/ अपीलाथ* Shri Miraj D.Shah
For the Respondent/ +,यथ* Shri Sallong Yaden, Addl. CIT, DR
आदे श/ORDER
Per Shri A.T.Varkey, JM
This is an appeal filed by the assessee against the order of Ld. CIT(A)-10, Kolkata dated 16.01.2017 for AY 2013-14.
2. The only issue to be decided in this appeal of assessee is as to whether the long term capital gains of Rs.24,87,605 arising out of sale of quoted equity shares can be assessed as unexplained cash credit u/s 68 of the Income Tax Act 1961 (herein after ''the Act'') on the basis of adverse statements relied on by the AO.
3. Brief facts of the case are that the assessee is a resident individual and for the AY under appeal i.e. 2013-14, return was filed on 18/07/2014 declaring an income of Rs.7,70,950 and in the said return of income the assessee claimed to have earned long 2 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 term capital gains of Rs.24,87,605 on sale of shares of M/s Tuni Textile Mills Ltd. The AO noted that the assessee purchased 13,500 shares of Tuni Textile Mills Ltd on 06/04/2011 from a stock broker in an off-market transaction from M/s Badri Prasad & Sons who was a member of the Calcutta Stock Exchange. These shares were held in the demat account of the assessee maintained with M/s CD Equi search Private Limited and was sold through the CD Equi search Private Limited a member of the Mumbai Stock Exchange and on such sale Security Transaction Tax was duly paid. The payments were duly received in the bank account of the assessee. The AO found that there was an investigation conducted against this Company by the Director of Investigation and as per the report several companies were used for providing bogus capital gains and one such company was Tuni Textile Mills Ltd. The AO had issued notice to the broker and stock exchange to verify the off-market purchase transaction and no reply was received in response to the said notice. The AO took note of similar patterns of transactions carried out by other companies which was detected by the Investigation wing and the AO examined the audited accounts of Tuni Textile Mills Ltd and found that on 25-01- 2010 there was a preferential allotment of the shares of this Company raising Rs.7.5 crore. The AO found that the share price of the company increased from Rs.34.50 to Rs.269.50 i.e. there was a rise of 681% in the share price of the company and the AO also found that there was increase in share trading volume during the period. The AO found that there was a survey u/s 133A of the Act on the Company on 02.06.2015 and in the survey a deposition was taken, wherein the Managing Director of the Company Sri NP Surekha was examined; and the Sri NP Surekha stated that 47 persons were allotted preference shares on 25/01/2010 and a sum of Rs.7.50 crore was raised by the Company. According to him, this entire deal was done by one Sri Manish Baid; and then these 47 investors used the shares allotted to them to sell the same at jacked up prices and thus they earned bogus long term capital gains from such transactions which was stage managed by Sri Manish Baid. The AO thus concluded that the transaction of 2 3 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 the assessee was also a part of the bogus transactions and the same was accordingly held to be unexplained cash credit and assessed u/s 68 of the Act.
4. On appeal, the Ld CIT (A) upheld the decision of the AO and in his order, he reproduced the balance sheet and profit loss account of the said Company for the period 31-03-2011 to 31-03-2015 and he concluded that the company had poor financials and thus it did not justify the price rise. The Ld CIT(A) also reproduced the statement recorded in the survey proceedings. The Ld CIT(A) considering the statement held that the addition made by the AO deserves to be upheld and he accordingly upheld the same.
5. Aggrieved by the aforesaid order passed by the Ld. CIT(A) upholding the addition of Rs.24,87,605, the assessee has preferred this appeal before us seeking relief for deletion of the addition and directing the AO to treat the capital gains as exempt u/s 10(38) of the Act.
6. The Ld AR submitted that the addition made by the AO and upheld by the Ld CIT (A) was based on surmises, presumptions and suspicion alone and are therefore perverse. In the course of hearing of the case, the ld AR referred to various documentary evidences furnished in the Paper Book in support of the claim of the assessee to prove the genuineness of the transactions relating to LTCG on sale of shares. The documentary evidences included the following:
(i) Balance Sheet of the assessee for FY 2011-2012 wherein the investment made in shares were duly recorded and reflected.
(ii) The Bills for purchase of the shares of Ms Tunni Textile Mills Ltd
(iii) Copy of Demate Statement maintained with Ms CD Equisearch P Ltd where the shares were held.
(iv) Copy of contract notes issued by CD Equisearch P Ltd, member of Mumbai Stock Exchange having SEBI registration no INB 010781133 and code no 087.3 4 ITA No.443/Kol/2017
Kiran Kothari HUF A.Y.2013-14
(v) The bank statement of the maintained with Bank of Maharastra reflecting the payment received for the sale of shares.
7. The submissions of the ld AR are summarized as follows:
(a) That the assessee had not purchased the shares by the Preference Share Route. The allotment made in preference share was on 25-01-2010 while the assessee purchased the shares on 06-04-2011 through the broker.
(b) That the transactions of purchase of shares were not doubted by the AO in the year of purchase i.e AY 2010-2011. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO in ITA No. 19/Kol/2014 dated 2.12.2016. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc.
(c) The AR also stated that as the sale was made on the online platform of the stock exchange it was his submission that the assessee did not know the names of the buyers and has no connection and/or relations with any such persons. The transactions of sale of shares were online trading system through his broker from whom he received the sale consideration. The broker also receives payments for all his transactions from Stock Exchange. The seller and the buyer cannot know the names of each other as well as their respective brokers, who were involved in the trading transactions in the secondary platform. In such a situation according to ld AR, it cannot be presumed that there could be any transfer of cash between the buyers and sellers to convert the unaccounted money of the beneficiaries as alleged by the AO. The ld AR referred to the judgement of Hon'ble Bombay 4 5 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 High Court in the case of CIT vs. Lavanya Land Pvt. Ltd. [2017] 83 taxmann.com 161 (Bom) to contend that there was no evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. In the said case, the Hon'ble High Court at Para 21 held that in absence of any material to show that huge cash was transferred from one side to another, addition cannot be sustained.
(d) That the brokers and persons named in the statement of the MD of the Company which was recorded in the survey proceedings of the Department did not contain the name of the assessee, nor his broker and nor did the assessee know any of the persons name therein.
(e) The ld AR submitted that all the observations, conclusions and findings of the lower authorities are based on suspicion, surmises and hearsay. According to ld AR, it is trite law that the suspicion howsoever strong cannot partake the character of legal evidence. Reference was made to the judgement of Hon'ble Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC, , Umacharan Shaw 37 ITR 271 and Omar Salay Mohamed Sait 37 ITR 151. The ld AR submitted that the entire case of the revenue is based upon the presumption that the assessee has ploughed back his own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion how so ever strong it may appear to be, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. The ld AR referred to the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT [2017] 164 ITD 1 (Mumbai-Trib.)(SB).
5 6 ITA No.443/Kol/2017Kiran Kothari HUF A.Y.2013-14
(f) The ld AR drew our attention to the fact that neither the statement relied on by the authorities below were provided to the assessee nor any cross examination was allowed to prove the veracity of the statement. The ld AR drew our attention to the fact that in the statement of third party, the name of the assessee was not implicated. Even otherwise, according to ld AR, no adverse inference could be drawn against the assessee on the basis of untested statements without allowing opportunity of cross-examination. The ld AR referred to and relied on the following judgements in support of the aforesaid submissions:-
(i) Andman Timber Industries vs. CCE - [2015] 62 taxmann.com 3 (SC)
(ii) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agr/2009 (Agra ITAT)
(iii) ACIT vs. Amita Agarwal & Others - ITA No. 247/(Kol) of 2011 (Kol ITAT)
(iv) ITO vs. Bijaya Ganguly - ITA Nos. 624 & 625/Kol/2011 (Kol ITAT)
(v) Ganeshmull Bijay Singh Baid HUF vs. DCIT - ITA Nos.
544/Kol/2013 (Kolkata ITAT)
(vi) Rita Devi & Others vs. DCIT - IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT)
(vii) Malti Ghanshyambhai Patadia vs. ITO - ITA No.3400/Ahd/2015 (Ahmedabad ITAT)
(viii) Pratik Suryakant Shah vs. ITO - [2017] 77 taxmann.com 260 (Ahmedabad ITAT)
(ix) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT)
(x) Atul Kumar Khandelwal vs. DCIT - ITA No. 874/Del/2016 (Delhi ITAT)
(xi) Farah Marker vs. ITO - ITA No. 3801/Mum/2011 (Mumbai ITAT) 6 7 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14
(g) That according to ld AR, the statement recorded under oath during survey proceedings has no evidentiary value and hence the same cannot be used against the assessee. The ld AR referred to and relied on the decision of the Hon'ble Apex Court in the case of CIT vs S Khader Khan Sons reported in (2012) 210 Taxman 248 (SC) wherein it was held that the statement recorded on oath u/s 133A of the Act has no evidentiary value, since during survey, authorities under the Act has not been empowered to administer oath and so any admission made during such statement cannot be made the sole basis of addition.
(h) The Ld AR relied on the following decisions and the summarized their ratio as held in the said decisions:
(i) CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal HC) - In this case the Hon'ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI's action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed.
(ii) CIT V. Rungta Properties Private Limited [ITA No. 105 of 2016] (Cal HC) - In this case the Hon'ble Calcutta High Court affirmed the decision of this tribunal , wherein, the tribunal allowed the appeal of the assessee where the ld AO did not accept the explanation of the assessee in respect of his transactions in alleged penny stocks. The Tribunal found that the ld AO disallowed the loss on trading of penny stock on the basis of some information received by him. However, it was also found that the ld AO did not doubt the genuineness of the documents submitted by the 7 8 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 assessee. The Tribunal held that the ld AO's conclusions are merely based on the information received by him. The appeal filed by the revenue was dismissed.
(iii) CIT V. Andaman Timbers Industries Limited [ITA No. 721 of 2008] (Cal HC) - In this case the Hon'ble Calcutta High Court affirmed the decision of this Tribunal wherein the loss suffered by the Assessee was allowed since the ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine.
(iv) CIT V. Bhagwati Prasad Agarwal [2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009] - In this case the Assessee claimed exemption of income from Long Term Capital Gains. However, the ld AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded thereat. He therefore held that the transactions were bogus. The Hon'ble Jurisdictional High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by High Court.
(i) The AR drew our attention to the decision of the Hon'ble Calcutta High Court in the case of Pr CIT Vs Rungta Properties Private Limited ITAT No 105 of 2016 dated 8th May 2017 wherein it was held:8 9 ITA No.443/Kol/2017
Kiran Kothari HUF A.Y.2013-14 (11) On the last point, the Tribunal held that the Assessing Officer had not brought on records any material to show that the transactions in shares of the company involved were false or fictitious. It is finding of the assessing officer that the scrips of this company was executed by a broker through cross deals and the broker was suspended for some time. It is assessee's contention on the other that even though there are allegations against the broker, but for that reason alone the assessee cannot be held liable. On this point the Tribunal held -
"As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per the statement of one of the directors of the broker firm and also AO observed that assessee had not furnished any explanation in respect of the intention of showing trading of shares only in three penny stocks. AO relied the loss of Rs.25,30,396/- only on the basis of information submitted by the Stock fictitious. AO has also not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee. Thus ground No. 1 of the revenue is dismissed."
We agree with the reasoning of the Tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested questions, in our opinion do not raise any substantial question of law.
(j) The AR drew our attention to the decision of the Hon'ble High Court at Calcutta in the case of ALPINE INVESTMENTS ITA 620 of 2008dated 26th August 2008 wherein the Hon'ble Court held as follows:
"It appears that the share loss and the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments received 9 10 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 from stockbroker through account payee instruments, which were also filed in accordance with the assessment.
It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed."
(k) The ld AR concluded that where the purchase and sale transactions are supported and evidenced by Bills, Contract Notes, Demat statements and bank statements etc., the transactions of purchase of shares were accepted by the AO in earlier years, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the ld AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:-
(i) Baijnath Agarwal vs. ACIT - [2010] 40 SOT 475 (Agra (TM)
(ii) ITO vs. Bibi Rani Bansal - [2011] 44 SOT 500 (Agra) (TM)
(iii) ITO vs. Ashok Kumar Bansal - ITA No. 289/Agra/2009 (Agra ITAT)
(iv) ACIT vs. Amita Agarwal & Others - ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT)
(v) Rita Devi & Others vs. DCIT - IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT)
(vi) Surya Prakash Toshniwal vs. ITO - ITA No. 1213/Kol/2016 (Kol ITAT)
(vii) Sunita Jain vs. ITO - ITA No. 201 & 502/Ahd/2016 (Ahmedabad ITAT)
(viii) Ms. Farrah Marker vs. ITO - ITA No. 3801/Mum/2011 (Mumbai ITAT) 10 11 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14
(ix) Anil Nandkishore Goyal vs. ACIT - ITA Nos. 1256/PN/2012 (Pune ITAT)
(x) CIT vs. Sudeep Goenka - [2013] 29 taxmann.com 402 (Allahabad HC)
(xi) CIT vs. Udit Narain Agarwal - [2013] 29 taxmann.com 76 (Allahabad HC)
(xii) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC)
(xiii) CIT vs. Himani M. Vakil - [2014] 41 taxmann.com 425 (Gujarat HC)
(xiv) CIT vs. Maheshchandra G. Vakil - [2013] 40 taxmann.com 326 (Gujarat HC)
(xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) Ganeshmull Bijay Singh Baid HUF vs. DCIT - ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta & Others vs. ACIT - ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT)
(l) The ld AR further submitted before us that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon'ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon'ble Apex Court held that the burden of showing that a particular transaction is benami 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 circumstances unerringly 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 11 12 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 suspicion because the court cannot decide on the basis of suspicion. It has to act on legal grounds established by evidence. As per the ld AR the AO/ CIT(A) was not justified in invoking the provisions of section 68 of the Act to hold that the sale proceeds of shares. There is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker with CSE. The assessee produced all evidences to explain the source of the amounts received by the assessee from the brokers. The AO was not justified in assessing the sale proceeds of shares as unexplained cash credit under section 68 of the Act.
8. On the other hand, the Ld. DR vehemently opposed the plea of the Ld. AR and relied on the decision of the Ld CIT(A) and the AO and urged before the bench not to interfere with the order of the Ld CIT (A).
9. We have heard the rival submissions and perused the records. We note that in the present case, the appellant had purchased 13500 shares of M/s. Tuni Textile Mills Private Limited on 06.04.2011 from a stock broker in off-market transactions from M/s Badri Prasad & Sons, who was a member of Calcutta Stock Exchange. These shares were held in the demat account of the assessee maintained with M/s CD Equisearch Pvt. Ltd , a member of Mumbai Stock Exchange and ultimately these shares were sold through M/s. CD Equisearch and on such sale, Security Transaction Tax was duly paid. Payments were duly received in the bank account of the assessee. We take note that the purchase of shares by off-market transactions for purchase of shares is not illegal as was held by the Coordinate Bench of this Tribunal in the case of Dolarrai Hemani vs ITO in ITA NO.19/Kol/2014 dated 02.12.2016. The transactions were all through a registered broker (pages 18 and 19 of the paper book), backed by a contract note (page 22 of the paper book) and shares were credited in the demat accounts (page 25 of the paper book) and duly reflected in the books of account. In the light of these evidences on record we are of the opinion that the purchase of shares per-se cannot be held to be bad.
12 13 ITA No.443/Kol/2017Kiran Kothari HUF A.Y.2013-14 9.1. We note that there was a survey conducted u/s 133A of the Act by the Mumbai Investigation Wing against M/s. Tuni Textile Mills Pvt. Ltd on 02.06.2015 and in the survey a deposition was taken on oath wherein the Managing Director of the said company Shri N.P.Surekha was examined and he stated that 47 persons were allotted preference shares on 25.01.2010 and a sum of Rs.7.50 crores was raised by the company. He further submitted that this entire deal was done by one Shri Manish Baid and then these 47 investors used the shares allotted to them, sold the same at jacked up price and in the process they earned bogus long term capital gain from such transactions which was stage managed by Shri M.Baid. Based on this statement, the lower authorities concluded that the transactions of the assessee were also part of the bogus transactions and the same was accordingly held to be unexplained cash credit u/s 68 of the Act. We do not subscribe to the said view taken by the authorities below for the reasons stated below:-
We note that the assessee was not a part of 47 persons, who the managing director has named in the list of 47 persons and we also note that there is no material to remotely suggest that the assessee dealt with the said entry operator Shri Manish Baid, who is said to have stage managed and undertaken the entire transactions. We also find that the assessee has not dealt with any person or broker named in question no.28 of the statement which has been recorded on oath by the survey team and which has been reproduced by the ld. CIT(A) from pages 31 to 36 of the impugned order(Question no.28 finds place in page-35 of the impugned order). We therefore find merit in the submissions of the assessee that the statement recorded on oath during the survey cannot be the sole basis for adverse finding against the assessee. For this we rely on the decision of the Hon'ble Supreme Court in the case of CIT vs Khader Khan Son 352 ITR 480 (SC) wherein it has been held that section 133A (survey) does not empower any income tax authorities to examine any person on oath, hence any such statement lacks evidentiary value and any admission made during the survey cannot by itself be made the basis of addition. We therefore hold that the statement of Shri N.P.Surekha recorded 13 14 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 on oath during the survey proceedings cannot be the sole basis to make the impugned addition. We note that the assessee had not purchased the shares by the Preference Share Route as stated by the party before the survey party. The allotment made in preference share was on 25-01-2010, whereas the assessee purchased the shares on 06-
04-2011 through the broker. ( i.e after more than one year and three months) We find that the transactions of capital gains as claimed by the assessee was duly backed by relevant documentary evidences which include the following :-
(i)The balance sheet of the assessee for the financial year 2011-12 wherein the investment made in these shares were duly recorded and reflected (page 16 of the paper book);
ii) The bills of purchase of shares of M/s. Tuni Textile Mills Pvt. Ltd (page 18 of the paper book)
iii)Copy of the demat statement maintained with M/s. CD Equi Search where the shares were held (page 24 of the paper book)
iv) Copy of the contract notes issued by M/s. CD Equi Search Ltd, Member of Mumbai Stock Exchange having SEBI Registration No.INB010781133 and Code No.087 (page 19 to 22 of the paper book
v) The bank statement maintained by the assessee with Bank of Maharshtra reflecting the payment received for the sale of shares (page 23 of the paper book).
9.2. We find force in the contentions of the ld. AR that the AO and CIT(A) was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstance, human conduct and preponderance of probability without bringing on record any relevant legally admissible evidence against the assessee. For the said proposition we rely on the judgment of the Special Bench of Mumbai Bench in the case of GTC Industries Ltd. (supra). The various facets of the contention of the AO, to rope in the assessee for drawing adverse inferences which remain unproved based on the 14 15 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 evidence available on record are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the ld. AR are also not reiterated for the sake of brevity. We further find that neither the reports relied on by the AO has not been brought on record nor is there any reference of finding of such report to impute the assessee is there on record. The AO has merely carved out certain features/modus- operandi of companies indulging in practices not sanctioned by law and as mentioned in such report. However, we note that neither any investigation was carried out against the assessee nor against the brokers to whom the assessee dealt with the purchase and sale of shares in question. Thus the AO has failed to bring on record any material contained in the purported reports which are having so called adverse impact on the assessee. We further find that the company under scanner was having share Capital as on 31.03.2013 of Rs.13.18 crores and was having assets worth Rs.24.25 crores and a turn over of Rs.19.32 crores and profit of Rs.1.35 crores. Thus the allegation that these companies did not have financial credentials is not correct and so is perverse and therefore we do not subscribe to the said finding and necessarily negate the finding.
At the cost of repetition, we find that the transactions of sale of shares by the assessee was duly backed up by material/evidence including contract notes, demat statement, bank account reflecting transactions, the stock brokers have confirmed the transactions (pages 24-25 of the paper book), the shares having been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/evidence to prove that the assessee or any one on his behalf has rigged the stock price. It should be noted that the Stock Exchange and SEBI are the statutory authorities appointed by the Govt. of India to ensure that there is no stock rigging or manipulation. The AO has not brought any evidence on record to show that these agencies have alleged any stock manipulation 15 16 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 against the assessee or the brokers or the company in question. In absence of any evidence to back the conclusion of AO/CIT(A), it cannot be said that merely because the stock price moved sharply, the assessee was to be blamed for bogus transitions. It is also pertinent to note that the assessee has purchased the stocks through registered brokers and thereafter the assessee has sold the shares through the registered share/stock brokers with Calcutta Stock Exchange, and both have confirmed the transactions and have issued valid contract notes as per law; and in similar case, the Hon'ble Calcutta High Court in the case of Principal CIT vs Rungta Properties in ITA No.105 of 2016 dated 08 May, 2017 wherein it was held that "on the last point, the tribunal held that the AO had not brought relevant material to show that the transactions in shares of the company involved were false or fictitious. It is the finding of the AO that the scripts of this company was executed by a broker and the broker was suspended for some time. It is the assessee's contention that even though there are allegations against the broker, and for that reason the assessee cannot be held liable on this point, the tribunal held that -
"As a matter of fact the AO doubted the integrity of the broker and the broker firm and also AO observed that the assessee had not furnished any explanation in respect of any discussion of trading of shares. The AO relied the loss of Rs.25,30,396/- only on the basis of information submitted by stock as fictitious. The AO has also not doubted the genuineness of the documents placed by the assessee on record. The AO's observation and conclusion are merely based on information. Therefore on such basis, no disallowance can be made and accordingly we find no infirmity in the order of the ld. CiT(A), who has rightly allowed the claim of the assessee. This ground no.1 of the revenue is dismissed."
We agree with the reasoning of the tribunal on this point also. We do not find any reason to interfere with the impugned order. The suggested question, in our opinion do not raise any substantial question of law."
9.3. In the light of the documents stated i.e. (i to v) in Page14(supra) we find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the 16 17 ITA No.443/Kol/2017 Kiran Kothari HUF A.Y.2013-14 ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. In the aforesaid facts and circumstance, for allowing the appeal we rely on the decision of the Hon'ble Calcutta High Court in the case of M/s. Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 wherein the High Court held as follows :
"It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment.
It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed."17 18 ITA No.443/Kol/2017
Kiran Kothari HUF A.Y.2013-14 9.4. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition.
10. In the result the appeal of the assessee is allowed.
Order is pronounced in the open court on 15th November, 2017 Sd/- Sd/-
(Dr. A. L. Saini) (Aby. T. Varkey)
Accountant Member Judicial Member
Dated :15th November, 2017
RG.(Sr.P.S.)
Copy of the order forwarded to:
1. Appellant - Kiran Kothari (HUF), C/o D.J.Shah & Co., Kalyan Bhawan, 2, Elgin Road, Kolkata-700020.
2 Respondent - ITO, Ward-35(3), Kolkata
3. The CIT(A), Kolkata
4. CIT , Kolkata
5. DR, Kolkata Benches, Kolkata /True Copy, By order, Sr. Pvt. Secy., 18