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03-07-2019, Sumita Hinger, Section 132(4), 153A(1), Tribunal Kolkata

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3 months 1 week ago #9993 by amit
Section - 132(4), 153A(1), 68, 4(1), 10(38)
Order Date - 03-07-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - Sumita Hinger
Respondent - ITO
Justice - A. T. Varkey, JM & Dr. A. L. Saini, AM
Citation - 719Taxpundit83
Appeal No. - I.T.A. No. 2665/Kol/2018
Asstt. Year - 2013-14


PER : A.T.Varkey, JM

This is appeal preferred by the assessee against the order of Ld. CIT(A) – 6, Kolkata dated 30.10.2018 for Assessment Year 2013-14.

2. The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming AO’s action wherein the LTCG claim made by the assessee of Rs. 12,57,809/- u/s 10(38) was disallowed on sale of shares of M/s. Tuni Textiles & Mills Ltd. (herein after referred to M/s. TTML.) and added Rs. 14,34,300/- u/s 68 of the Act.

3. At the outset the ld. AR submitted that this Tribunal in the case of Rohit Jalan vs ITO in ITA No. 2205/Kol/2018 by order dated 17.05.2019 upheld the claim of the assessee in respect of the sale of scrip of M/s. TTML. and allowed the claim of LTCG as exempt u/s 10(38) of the Income Tax Act 1961( herein after ‘the Act’).

4. Brief facts of the case is that the assessee has earned LTC gain Rs. 12,57,809/- by selling of share of M/s. TTML. and the same has been claimed as exempt u/s 10(38) of the Act. The AO observed that an investigation was conducted on a number of penny stock companies by the Directorate of Investigation, Kolkata and total 84 penny stock companies were identified and worked upon. Out of 84 penny stock companies which have been used for generating bogus LTCG i.e. M/s. TTML. is one of the same. According to AO the basic trade pattern of all the 84 scripts are same. A close view of all such data suggested that there is a common pattern in the trading of such scripts and the pattern is that they represent a bell shape in their trading. It means first, their prices start from low range, then it raises rapidly, stays there for a while and then it decreases more rapidly. Thus trade pattern makes a bell shape. Apart from that from the balance sheet of the penny stocks it will be found that they have no actual financial credentials to support their share movement pattern. Almost all the companies have no fixed asset, no turnover, no profitability and they did not pay taxes. It shows that these are made specially for the purpose of providing Bogus Long Term Capital Gain or Short Term Capital Loss to willing beneficiaries. The AO notes that 800 number of script of M/s. TTML. with face value of Rs. 10/- each was purchased on 29.03.2011 for a total purchase value of Rs. 2,01,994/-. Consequently, the shares of M/s. TTML. were subdivided and 8000 shares of face value of Rs. 1/- was credited to the assessee’s DEMAT A/c on 09.4.2011. 7000 shares of the same scrip were sold on 21.08.2012 with a total sale value of Rs. 14.34,300/-.

5. However taking note of the report of the Investigation Wing, the AO ignored the documents filed by the assessee before him and was pleased to add the entire sale consideration of Rs 14,34,300/- u/s 68 of the Act. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who confirmed the action of AO. Aggrieved the assessee is before us.

6. After hearing both the parties and after carefully going through the records, we note that the assessee has purchased the shares through online (note through offline) of M/s. TTMLwhich is seen placed from the page 15 of the Paper Book. We note that the assessee has purchased this scrip through the broker M/s GCM Securities Ltd. which was registered with SEBI and member of the Bombay Stock Exchange. The contract note dated 29.03.2011 is found placed at page 15 of paper book wherein the assessee has purchased 800 shares @ Rs. 500 per share for Rs. 2,01,704/-. The payments have been made through banking channel of Indian Overseas Bank which is found placed at page 6 of the Paper Book. Demat statement A/c No. 10005610 of M/s Lohia Securities Ltd. for delivery of shares purchased seen placed at page 17 of the Paper Book. Copy of the letter dated 15.04.2011 of M/s Purv Share Registry (India) Pvt. Ltd. for sub-sivision of 800 shares of Rs. 10/- each M/s TTML into 8000 shares of Rs. 1/-. The sale contract note dated 22.08.2012 of share broker M/s. GCM Securities ltd. for sale of 7000 shares of M/s. TTML is found at page 20 of the Paper Book. Bank statement of Indian Overseas Bank showing receipt of sale price is found placed at page 21 of the Paper Book. Transaction statement of A/c No. 10005610 of National Depository Ltd. DP: Lohia Securities Ltd. as proof for delivery of 7000 shares of M/s TTML found at page 22 of the Paper Book. With the aforesaid documents, the assessee has claimed to have exempt income of Rs. 12,57,809/- u/s 10(38) of the Act. Thus, we note that the assessee has purchased the shares through online through registered brokers and sold the same also in the Bombay Stock Exchange through the registered brokers and the shares were duly dematerialized and the purchase/sale consideration was through the banking channel. We note that the Tribunal had the occasion to consider the claim of the assessee in the same scrips (M/s. TTML) in a similar case that of Rohit Jalan (supra) wherein the Tribunal allowed the claim holding that M/s. TTML scrips are not bogus and it was a genuine scrip and has held as under:

“4. I have heard rival submissions and gone through the facts and circumstances of the case. We note that though the assessee has raised the legal issue against validity of reopening u/s. 147 read with sec. 148 of the Act, it is noted that in the reassessment order the addition is in respect of the LTCG claim of the assessee in respect of sale of scrip of M/s. Tuni Textile Mills Ltd. as exempt u/s. 10(38) of the Act which was held by AO to be bogus and that action of AO has been confirmed by the Ld. CIT(A) on appeal of the assessee. However, we note that in a number of cases, this Tribunal has held that the scrip of M/s. Tuni Textile Mills is not bogus and has allowed the claim of assessee in respect of LTCG claim on the sale of this scrip i.e. M/s. Tuni Textile Mills Ltd. (in short M/s. TTML). We note that the issue is no longer res integra as the Tribunal in IT(SS) A Nos. 112 & 113/Kol/2018 Ramesh Chandra K. Shah Vs. ACIT for AYs 2011-12 and 2012-13 order dated 12.02.2019 wherein the Tribunal has held that the scrip of M/s. TTML is not a bogus scrip. We note that in this case the Tribunal has held as under:

“10. We have heard rival submissions and gone through the facts and circumstances of the case. First, we make it clear that as per the admitted facts enumerated in para 4 supra, both the assessment years before us are unabated assessments, since these assessment years were not pending before the AO on the date of search on 12.08.2015, so no addition can be made by the AO, without the aid of incriminating materials. With that background in mind, let us see whether there are any incriminating materials unearthed against the assessee during search, which can justify the addition made by the AO. In the said look-out, we note that the AO’s assertion that incriminating material i.e. CJ-2 and CJ-13 were recovered during search which show that the assessee dealt with M/s. TTML which resulted in bogus LTCG, our opinion after examining carefully each documents which are placed from pages 32 to 69 are that they are nothing but bank statement, ledgers, accounts maintained by assessee of GCM securities[broker], ledger account of Bank of India, Burra Bazar Branch, contract notes of sale, summary of LTCG, Balance Sheet, Income Tax Return which documents according to us, can

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