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03-06-2019, Kaushalya Agarwal, Section 68, 4(1), 10(38), Tribunal Kolkata

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3 months 2 weeks ago #9646 by amit
Section - 68, 4(1), 10(38), 69, 131
Order Date - 03-06-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - Kaushalya Agarwal
Respondent - ITO
Justice - A. T. Varkey, JM & Dr. A. L. Saini, AM
Citation - 619Taxpundit62
Appeal No. - I.T.A. No. 194/Kol/2018
Asstt. Year - 2014-15


PER : A.T.Varkey, JM

This appeal has been filed by the assessee against the order of Ld. CIT(A)-10, Kolkata dated 26.12.2017 for AY. 2014 15.

2. Main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs.70,07,666/- being sale proceeds of equity shares of M/s. Global Infratech & Finance Ltd. (in short M/s. GIFL) u/s. 69 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”)

3. Brief facts of the case are that the AO noted that the assessee has claimed total exempt income of Rs.68,96,192/- on the exempt Long Term Capital Gain (LTCG) from transactions on which STT was paid. The AO noted that the assessee has earned LTCG from the sale of 107500 shares of M/s. Asianlak Capital & Finance Ltd. (in short M/s. ACFL) which was merged with M/s. GIFL afterwards. (our attention was drawn to page 15 of paper book wherein we note that M/s. ACFL did not merge with M/s. GIFL but the name of M/s. ACFL was changed to M/s. GIFL, which we note from the Certificate of Incorporation dated 28.02.2012 issued by Govt. of India, Ministry of Corporate Affairs).

Thereafter, the AO observed that assessee was not involved in activities of transactions in other shares and the assessee has not earned any LTCG from the sale of other shares. Thereafter, the AO discussed in the assessment order the general report of the Investigation Wing of the Income-tax Department which he reproduced from page 3 of the assessment order. According to general observations, the AO notes that the assessee has misutilised the system and wants to bring her unaccounted money into her regular books so that assessee can get immunity from paying any taxes. The AO notes at page 20 of the assessment order that some brokers have given statements u/s. 131 of the Act wherein they have said that in lieu of commission given to them, they facilitated the pre-a ranged accommodation entries to enable the assessee to make exempt LTCG gain/loss Thereafter, the AO cited the SEBI’s observation on the unscrupulous practice of certain share brokers in pre-determined, stage managed, sale of shares and treated the sale consideration claimed by the assessee as exempt as bogus and made an addition of the entire amount of sale consideration of Rs.70,07,666/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Agg ieved the assessee is before us.

4. We have heard riva submissions and gone through the facts and circumstances of the case. The Ld. AR assailing the decision of the Ld. CIT(A) drew our attention to the fact that the AO has erred in taking note of the facts properly. According to him, M/s. ACFL never merged with M/s. GIFL. The change was only in respect of name from M/s. ACFL to M/s. GIFL which is evident from the Certificate of Incorporation dated 28.02.2012 issued by Govt. of India, Ministry of Corporate Affairs. He also drew our attention to the fact that the AO erred in taking note that the assessee was not involved in the regular activities of transaction of shares. The Ld. AR drew our attention to page 9 of the paper book to show that the assessee in this assessment year itself was involved in investments of M/s. Ajanta Pharma Ltd., M/s. Asian Link as well as M/s. AKZO Nobel. So, according to Ld. AR, the AO erred in even taking note of the facts which were on record. According to him, with a prejudiced mind the AO being influenced by the Investigation Wing’s report (general report) as well as the SEBI’s observation in some other cases has denied the claim of the assessee without any material against the assessee/broker/scrips on which the saleconsideration the assessee received. According to Ld. AR, there is no whisper in the entire assessment order against the assessee/broker/scrips. According to Ld. AR, assessee has filed the contract note, demat statement, bank statement etc. to prove both the sales as well as the purchase of the shares. According to Ld. AR, only sec. 131 notice to the Chennai based M/s. KKJ Sons & Co. could not be served on them because they moved out from the address. AO without making any other enquiry to establish as to whether the ultimate purchaser of the shares through the Bombay Stock Exchange had come to a conclusion that the assessee had indulged in converting its unaccounted money as exempt income through the claim of LTCG on sale of such shares. Therefore, according to him, in the light of the documents produced by the assessee against which the AO has not made any adverse comments; and AO failed to adduce any material specifically against the assessee/broker/scrips or any adverse material has emanated from the investigation report of department/SEBI/SIT, the denial of the claim of exempt of LTCG is unjust, arbitrary and, therefore, pleads that the exempt LTCG claim to the tune of Rs.68,96,192/- be allowed.

5. Per Contra the Ld. DR vehemently supporting the order of the lower authorities drew our attention to the fact that the assessee had purchased the shares for Rs. 4,00,000/- and within a short span of time sold the same at Rs. 70,00,000/- which is unimaginable and goes against the preponderance of human probability. According to him, the department painstakingly has unearthed the systematic and nefarious practice of some brokers who had acted hand in glove with some paper companies have indulged in issuing shares for beneficiaries like assessee at a very low price and later after expiry of a holding period of twelve months, sells it at sky rocketing rates which is unimaginable and goes against the preponderance of human probability. According to him, the modus operandi is that the assessee, who is a beneficiary will purchase through the brokers the shares from unknown

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