Swati Luthra Vs ITO (ITAT Delhi)
Conclusion: Assessee had entered into genuine transaction of sale and purchase of shares and therefore, satisfied the conditions of Section 10(38) as no law prohibits purchase of shares in cash and it was the option of the buyer of shares to keep the shares either in Demat form or in paper form therefore, merely because the shares were dematted at a later stage, no adverse inference could be drawn.
Held: AO observed that share prices of two scrips sky rocketed without having any financial strength and the increase was due to artificial increase. He also observed that statements were also recorded by the investigation Wing in other cases of various brokers, operators and entry providers, who accepted that two scrips were Penny Stock companies and the scrips had been used to provide bogus LTCG to various beneficiaries. Therefore, AO held that the transactions of assessee were sham transactions and the LTCG so declared was nothing but unexplained Cash Credit under section 68 to be taxed @ 30% under section 115BBE. AO also raised an objection regarding the cash purchase of shares and that shares were dematerialized a few days back only from the date of sale. It was held atleast some inquiry should have done from these persons, whether they had provided any entry to assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis any adverse inference was drawn, then it could not be primary evidence or material to nail the assessee and simply based on the statement no addition could be made. There was no law which prohibits the purchase of shares in cash, however in the present case, assessee had filed copies of bills of purchase, copy of share certificates and transfer forms etc. before AO and no adverse inference could be drawn only because the shares were purchased in cash. Regarding Demat of shares, it was the option of the buyer of shares to keep the shares either in Demat form or in paper form. Merely because the shares were dematted at a later stage, no adverse inference could be drawn. The transactions were carried through Demat account and banking channel on which STT has been paid by assessee. The report of the SEBI was not adverse in nature against the assessee because name of the assessee did not appear therein for conducting dubious transaction. The report of the Investigation Wing and other material was neither confronted to assessee nor there was any inquiry from where it transpired that assessee was beneficiary of any bogus long-term capital gain; therefore, the same could not be read in evidence against the assessee. Assessee had entered into genuine transaction of sale and purchase of shares and therefore, satisfied the conditions of Section 10(38).
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeals have been filed by the above named assessees against separate impugned orders of even date 06.09.2017 in case of Swati Luthra, Namrata Sehgal Luthra and Shruti Luthra and order dated 22.09.2017 in the case of Asha Luthra), passed by ld. CIT (Appeals) – 17, New Delhi for the quantum of assessment passed u/s 143(3) for the Assessment Year 2014-15. Since the issues involved in all the aforesaid assessee’s appeals are common arising out of identical set of, therefore, same were heard together and are being disposed of by way of this consolidated order.
2. We will first take up the appeal in the case of Swati Luthra in ITA No. 6480/Del/2017 and the finding given therein will apply mutatis mutandis in other appeals also.
3. In the grounds of appeal, the assessee has challenged the disallowance of exemption claimed on account of long term capital gains from sale of shares of companies, M/s Turbo Tech Engineering Ltd. of Rs. 20,55,146/-; and M/s Esteem Bio Organic Food Processing Ltd. (Rs. 23,00,616/- (public limited companies listed on recognized stock exchange) and similar disallowances with respect to same scrips have been made in the cases of Shruti Luthra, Namrata Sehgal Luthra and Asha Luthra. Though the assessee had raised various grounds before us, the only effective issue involved in this appeal is as to whether the ld. CIT (A) was justified in confirming the addition made as alleged unexplained cash credit u/s 68 read with section 115BBE of the I.T. Act, 1961 by treating Long Term Capital Gain (LTCG) derived from sale of shares of companies M/s Turbo Tech Engineering Ltd. (Rs. 20,55,146/-) and M/s Esteem Bio Organic Food Processing Ltd. (Rs. 23,00,616/-) on the facts and in circumstances of the case.
4. The brief facts are that the assessee filed her return of income for the AY 2014-15 on 31.07.2014 declaring total income of Rs. 16,01,720/-, wherein she had declared income from salary, house property and other sources and also income from investing in shares. The assessee claimed exempt income u/s 10 (38) of the Act in respect of long term capital gain derived from sale of listed company’s shares of companies M/s Turbo Tech Engineering Ltd. (Rs. 20, 55, 146/-) and M/s Esteem Bio Organic Food Processing Ltd. (Rs. 23, 00, 616/-) where securities transaction tax was duly suffered by assessee. The sales of shares were affected in the stock exchange through a registered share broker after paying STT. Accordingly, the assessee had claimed long term capital gain as exempt under section 10 (38) in the return of income to the tune of Rs. 20,55,146- and Rs. 23,00,616/-. The assessee during the course of assessment proceedings had submitted all the relevant evidences for purchase of shares made in cash by the assessee, along with sale contract notes together with bank statements and Demat statements before the ld AO evidencing the entire transaction of sale of shares being routed through regular disclosed bank statement of the assessee. The aforesaid details and documents as submitted by assessee before the authorities below are tabulated along with page nos. of paper book as submitted before us:-
Details of long term capital gain claimed as exempt under section 10(38) on account of sale of scrip of M/s Turbotech Engineering Ltd.
