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05-11-2019, Narendra Shrikishan Agrawal, Section 133(6), 10(38), Tribunal Pune

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6 days 12 hours ago #11328 by amit
Section - 133(6), 10(38), 68, 133A, 131
Order Date - 05-11.2019
Favouring - Assessee Partly
Court - Tribunal Pune
Appellant - Narendra Shrikishan Agrawal
Respondent - ACIT
Justice - R.S. SYAL VP & S.S. VISWANETHRA RAVI JM
Citation - 1119Taxpundit64
Appeal No. - ITA No.257/PUN/2019
Asstt. Year - 2015-16

Order

PER : S.S. VISWANETHRA RAVI, JM :

This appeal by the assessee against the order dated 01-11-2018 passed by the Commissioner of Income Tax (Appeals)-1, Aurangabad [‘CIT(A)’] for assessment year 2015-16.

2. The assessee raised ground Nos. 1 to 7 involving the same issue questioning the action of CIT(A) in confirming the addition made by the Assessing Officer on account of Long Term Capital Gain in the facts and circumstances of the case.

3. The brief facts as emanating from the record are that the assessee is an individual and also a Director in M/s. Sagar Paridhan Pvt. Ltd. The assessee filed its return of income on 31-03-2017 declaring total income of Rs.18,90,300/- and has shown income from professional fee, house property, business income, capital gain and income from other sources. Notices u/s. 143(2) and 142(1) were issued. In response to which, Authorized Representative appeared on behalf of the assessee in the assessment proceedings.

4. In the assessment proceedings, it is noted, while dealing with the issue relating to Capital Gain, the Assessing Officer found that the assessee purchased 25 000 shares of Lifeline Drugs and Pharma Limited for short hereafter as LD&PL for Rs.15,00,000/- and after conversion the same were become 2,50,000 shares, out of which 43,000 shares were sold which resulted Capital Gain of Rs.1,04,02,303/-. According to Assessing Officer the Long Term Capital Gain as claimed by the assessee is not natural and it is an arranged one. To elicit truth, the Assessing Officer conducted verification of activities of LD&PL by visiting its website.

5. Further, the AO examined summary of financials of LD&PL and observed that the total number of paid shares was increased by 151 times and there was no material corporate investment to support price rise of its scrip. On examination of trading frequency he was of the opinion that the transactions were conducted in a circular fashion involving the trade frequency, volume generation, contribution to price rise and buying behaviors and no demand for the shares of LD&PL which is a little known trading company during 2011-12 and price rise gained only during 2013- 14 and held no justification for such price rise.

6. Regarding the assessee, the AO held that there was no substantial activity nor any investment in shares during the previous year records, thereby, the AO doubted the investment activity of a sessee in purchasing 25,000 shares of LD&PL for Rs.15,00,000/- , was of the opinion that the purchase of shares of LD&PL is a predetermined action to book Long Term Capital Gain by way of dubious methods with a specific intention, held the Long Term Capital Gain shown by the assessee is not genuine.

7. Regarding the pattern of transactions, he observed that the suspected entities linked to LD&PL created the demand against the supply from the preferential allottees and provided huge profitable exit to the allottees. The buyers are related/connected entities of preferential allottees. The preferential allottees, LD&PL and suspected entities were hand in glove to launder black money and raking in tax free profits. The AO, thereby, treated the said amount of Rs.1,04,03,303/- as unexplained cash credit and added the same u/s. 68 of the Act. The CIT(A) in First Appellate Proceedings held the Capital Gain was manipulated and the claim of assessee u/s. 10(38) of the Act is bogus and confirmed the view of the AO in adding the impugned amount u/s. 68 of the Act.

8. Before us, Shri Abhay Agarwal, the ld. AR submits that the Assessing Officer merely based on the presumptions, suspicion and surmises treated the Capital Gains from sale of listed equity share as nongenuine and denied the claim of exemption u/s. 10(38) of the Act. He submits that the LD&PL is a public limited company listed with Bombay Stock Exchange and regularly complying with the exchange procedure. He submits that all the documentation and formalities regarding allotment of shares were duly furnished in the assessment proceedings and the AO has not doubted the purchase of the shares which were supported by documentary evidences. The said shares were sold on Stock Exchange through registered stock broker Adinath Stock Broking Pvt. Ltd. and all documents relevant to the said transactions were filed before AO as well as CIT(A) to substantiate the genuineness of purchase and sale of shares of LD&PL. The ld. AR submits that the share transactions entered by the assessee are genuine, supported by documentary evidences, giving rise to Capital Gains. The third party statements had no relevance as there was no reference to the assessee or its transactions in said statements. The AO could not demonstrate as to how the assessee had any nexus with any of the alleged share brokers and purchasers. The assessee does not know any such persons or entities, the statements and references made by such persons or entities were general in nature and did not have any reference or nexus to the assessee. He submits that there are many factors having impact on the price of share listed in stock exchange and the said LD&PL

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