Case Law Details
Prakash Javia HUF Vs ITO (ITAT Indore)
Records placed before us also shows that report of the investigation wing or any enquiry conducted from 3rd persons were not made available to the assessee which thus grossly violates the principles of natural justice. As the assessee never got opportunity to go through these reports this action of the lower authorities was not justified in view of ratio laid down by Hon’ble Supreme Court in the case of Sona Builders (supra) wherein Hon’ble Court held that:
Para 7 -” Having regard to the statutory limit within which the appropriate authority has to act and his failure to act in conformity with the principles of natural justice, we do not think we can remand the matter to the appropriate authority. We must set his order aside.
Para 8 – “The appeal is, accordingly, allowed. The judgment and order under appeal is set aside. The order of the appropriate authority dated 31-5-1 993 is quashed.” [emphasis supplied]
We, therefore, in the totality of facts and in view of the ratios laid down by Hon’ble Courts and decision of Coordinate Benches squarely applicable on the instant issue raised before us, are of the considered view the alleged transaction of purchase and sale of equity shares of Kappac Pharma Ltd. are not bogus as the respective assessee(s) have duly charged there onus to prove the genuineness of purchase and sale of equity shares of listed company KPL (listed in Bombay Stock Exchange) by placing necessary documents to prove that the purchase are directly from the shareholder and sold through a registered broker and nothing adverse has been found by the revenue authorities and KPL is not held to be a penny stock company.
Further, with regard to the alleged addition we find that the it is purely based on the report of the investigation wing carried out in the case of other persons finding no mention or the involvements of assessee(s) in any of such report and thus, the claim of the LTCG has been rightly made as exempt income u/s 10(38) of the Act. We, thus, set aside the finding of the Ld. CIT(A) in all the instant appeals and direct the Ld. Assessing Officer to allow the claim of LTCG made u/s 10(38) of the Act made by the respective assessee(s) a
FULL TEXT OF THE ORDER OF ITAT INDORE
The above captioned appeals filed at the instance of different assessees pertaining to Assessment Year 20 14-15 are directed against the order of Commissioner of Income Tax (Appeals)-II (in short ‘Ld.CIT’], Indore dated 14.01.2019, 24.01.2019 & 14.01.2019 which are arising out of the order u/s 143(3) of the Income Tax Act 1961 (In short the ‘Act’) dated 25.11.2016 framed by ITO-5 (1), Indore.
2. The assessee has raised following grounds of appeal in ITANo.464/Ind/20 19
“1. at the order passed by Ld. CIT(A) is bad in law and on facts.
2. That the Ld. CIT(A) has erred in confirming the addition of 21,50,700/- under section 68, which is quite unjust, illegal and against the facts of the case.
3. That the Ld. CIT(A) has erred in considering the script from which the assessee has earned Long Term Capital Gain as “Penny Stock” a term nowhere define under the Income Tax Act as any other law for the time being in force, which is quite unjust, illegal and against the facts of the
4.That the Ld. CIT(A) has erred in confirming the disallowance of claim of assessee of exempted LTCG based on information/statement gathered by investigation wing of the department, without any opportunity to cross examine such persons and without providing such documents for assessee’s comments, which is quite unjust, illegal and against the facts of the case.
5. That the Ld. CIT(A) has erred in confirming the disallowing of claim of exempted income based on wrong analysis of the financial and prices of the shares, which is quite unjust, illegal and against the facts of the case.
6. That the Ld. CIT(A) has erred in mentioning the fact that Learned AO has tried to conduct inquires during assessment proceedings, in confirming disallowance, whereas no such inquiries have been carried out, which is quite unjust, illegal and against the facts of the case.
7. That the Ld. CIT(A) has erred in treating the genuine transactions of shares as sham transaction, without any evidence or logical reasons in support of the same, which is quite unjust, illegal and against the facts of the case.
8. That the Ld. CIT(A) has erred ignoring the various judgments quoted by the assessee, which is quite unjust, illegal and against the facts of the
9. Appellant craves to leave, add, amend, alter or modify of any ground before final date of hearing.”
3. Assessee has raised following grounds of appeal in ITANo.465/Ind/20 19
“1. That the order passed by Ld. CIT(A) is bad in law and on facts.
2. That the Ld. CIT(A) has erred in confirming the addition of 14,09,940/- under section 68, which is quite unjust, illegal and against the facts of the case.
3. That the Ld. CIT(A) has erred in considering the script from which the assessee has earned Long Term Capital Gain as “Penny Stock” a term nowhere define under the Income Tax Act as any other law for the time being in force, which is quite unjust, illegal and against the facts of the case.
4. That the Ld. CIT(A) has erred in confirming the disallowance of claim of assessee of exempted LTCG based on information/statement gathered by investigation wing of the department, without any opportunity to cross examine such persons and without providing such documents for assessee’s comments, which is quite unjust, illegal and against the facts of the case.
5. That the Ld. CIT(A) has erred in confirming the disallowing of claim of exempted income based on wrong analysis of the financial and prices of the shares, which is quite unjust, illegal and against the facts of the case.
6. That the Ld. CIT(A) has erred in mentioning the fact that Learned AO has tried to conduct inquires during assessment proceedings, in confirming disallowance, whereas no such inquiries have been carried out, which is quite unjust, illegal and against the facts of the case.
7. That the Ld. CIT(A) has erred in treating the genuine transactions of shares as sham transaction, without any evidence or logical reasons in support of the same, which is quite unjust, illegal and against the facts of the case.
8. That the Ld. CIT(A) has erred ignoring the various judgments quoted by the assessee, which is quite unjust, illegal and against the facts of the case.
9. Appellant craves to leave, add, amend, alter or modify of any ground before final date of hearing.”
4. Assessee has raised following grounds of appeal in ITANo.466/Ind/20 19
1. That the order passed by Ld. CIT(A) is bad in law and on facts.
2. That the Ld. CIT(A) has erred in confirming the addition of 20,46,018/- under section 68, which is quite unjust, illegal and against the facts of the case.
3. That the Ld. CIT(A) has erred in considering the script from which the assessee has earned Long Term Capital Gain as “Penny Stock” a term nowhere define under the Income Tax Act as any other law for the time being in force, which is quite unjust, illegal and against the facts of the case.
4. That the Ld. CIT(A) has erred in confirming the disallowance of claim of assessee of exempted LTCG based on information/statement gathered by investigation wing of the department, without any opportunity to cross examine such persons and without providing such documents for assessee’s comments, which is quite unjust, illegal and against the facts of the case.
5. That the Ld. CIT(A) has erred in confirming the disallowing of claim of exempted income based on wrong analysis of the financial and prices of the shares, which is quite unjust, illegal and against the facts of the case.
6. That the Ld. CIT(A) has erred in mentioning the fact that Learned AO has tried to conduct inquires during assessment proceedings, in confirming disallowance, whereas no such inquiries have been carried out, which is quite unjust, illegal and against the facts of the case.
7. That the Ld. CIT(A) has erred in treating the genuine transactions of shares as sham transaction, without any evidence or logical reasons in support of the same, which is quite unjust, illegal and against the facts of the case.
8. That the Ld. CIT(A) has erred ignoring the various judgments quoted by the assessee, which is quite unjust, illegal and against the facts of the case.
9. The ld. CIT(A) has erred in confirming the addition of Rs.61,380/-, without any evidence against the assessee, which is quite unjust illegal and against the facts of the case.
10. Appellant craves to leave, add, amend, alter or modify of any ground before final date of hearing.”
5. From perusal of all the above grounds we observe that common issue relates to genuineness of claim of Long Term Capital Gain (in short LTCG) u/s 10(38) of the Act from sale of equity shares of Kappac Pharma Limited(in short KPL). Following details of LTCG claim and addition made by the Ld. AO will be helpful to address the common issue:
a) in case of Prakash Javia HUF, 3000 equity shares of Kappac Pharma Limited were purchased on 25.06.2012 at Rs. 36,000/- and sold on 06.03.2014 at Rs.2, 14,962/- giving rise to LTCG at 2 1,11,075/-. Ld. AO made the addition for gross receipts from sale (without deducting brokerage) at Rs.2 1,50,700/-.
b) in case of Jayesh Javia HUF, 2,000 equity shares of Kappac Pharma Limited were purchased on 18.10.2012 at Rs. 24,000/- and sold on 07.03.2014 at Rs. 14,33,937/- giving rise to LTCG at 14,09,939/- and this claim denied by the ld. AO.
c) In case of Prakash Javia, 3,000 equity shares of Kappac Pharma Limited were purchased on 25.06.20 12 at Rs.36,000/- which were sold on 18.02.20 14 at Rs.20,46,018/- giving rise to LTCG at 20, 10,018/-. Ld. AO made addition for net sale at Rs.20,46,018/- and claim of LTCG.
6. From perusal of the above, we find that common facts relates to genuineness of transactions of sale of equity shares of Kappac Pharma Limited.
7. As the issue raised is common and almost identical facts, all the above captioned appeals were heard together at the request of all the parties and are thus being disposed of by this common order for the sake of convenience and brevity. As agreed by all the parties we will take up facts of the assessee namely Prakash Javia, HUF for adjudicating this common issue.
8. Brief facts of the case as culled out from the records are that the assessee is a Hindu Undivided Family(HUF). Return of income filed on 12.09.20 14 declaring total income of Rs.5, 15,270/- and also claiming exempt income u/s 10(38) of the Act from Long Term Capital Gain from sale of listed securities at Rs.2 1,11,075/-. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act to the assessee. Written submissions were filed. Books of accounts and other documents produced were examined on test check basis. As regards transactions of purchase and sale of equity shares of Kappac Pharma Limited, though necessary evidences were filed but the Ld. AO further issued a notice u/s 133(6) of the Act to the purchaser of the equity shares sold by the assessee. But since there was no reply, Ld. AO in the absence of evidences added the whole amount of Rs.2 1,50,700/-. This amount was taken from the contract note issued by Kotak Securities Limited placed at pages 12 of the paper book. Ld. AO denied the claim of brokerage. Income assessed at Rs.26,65,970/-.
9. Aggrieved assessee preferred an appeal before the ld. CIT(A) and again placed necessary details along with placing reliance on various judgments appearing at pages 3 to 10 of the impugned However, Ld. CIT(A) did not find any merit in the submissions made by the assessee and since the scrip namely “Kappac Pharma Limited” was specified as ?Penny stock’ on the portal of Income Tax Department, he held that the alleged transactions of purchase and sale of equity shares of Kappac Pharma Limited is a sham transaction which cannot stand test of human probability and in holding so ld. CIT(A) relied on various judgments which are part of his finding appearing in para 4 of the impugned order at pages 11 to 15.
10. Now the assessee is in appeal before the Tribunal. Ld. counsel for the assessee referred to the detailed submission running from pages 1 to 27 placed on record. Reference made to the paper book running from pages 1 to 26, containing various details and evidences which were placed before the lower authorities.
11. Ld. counsel for the assessee also submits that the alleged transactions of sale of equity shares of Kappac Pharma Limited was carried out through recognized stock exchange and the transactions fulfilled all the parameters provided in section 10(38) of the Act as equity shares are Long Term Capital Asset held for more than 12 months and sold on a recognized stock exchange through registered broker namely Kotak Securities Limited after paying Securities Transaction Tax.
12. It is also submitted that the alleged information received by the AO from investigation wing about the company Kappac Pharma Limited was never made available to the assessee which violates principles of natural justice and thus renders entire proceedings as void. Reliance placed on the judgment of Hon’ble Supreme Court in the case of Sona Builders [2001] 119 Ta2man 430.
13. Further, it is submitted that no material was found by the ld. AO which could establish that the assessee had converted unaccounted money into accounted money by managing bogus Reliance placed on judgment of Hon’ble Delhi High Court in the case of Krishna Devi ITANo. 125 of 2020 dated 15.01.2021 & Judgment of Hon’ble Bombay High Court in the case of Uttamchand Jain [2009] 182 ta2man 243 dated 02.07.2009.
14. Further reliance placed on the following decisions wherein the LTCG from sale of shares of Kappac Pharma Limited are held to be genuine:
i. Aditya Mundra ITANo.632/Ind/2019 dated 13.01.2021 (I.T.A.T., Indore)
ii. Sunil Agrawal HUF ITANo. 434/Kol/2020 dated 03.12.2020 (I.T.A.T., Kolkata)
iii. Yogendra Dalmia ITA No. 774/KOL/2018 dated 09.08.2019 (I.T.A.T., Kolkata)
15. It is also submitted that the Kappac Pharma Limited is neither included in the list of Shell Companies nor has been struck off from the Registrar of companies. Reliance placed on decision of I.T.A.T., Mumbai in the case of Shakti Hardware Collections Private Ltd. in 6301/Mum/2014 dated 31.01.2018.
16. Referring to the ratio that no addition can be made when all documents to substantiate the transactions are submitted and the onus is discharged by the assessee, reliance placed on the following decisions:
i. Achal Gupta ITA No. 501/LKW/201 9 dated 16.12.2020(I. T.A. T., Lucknow)
ii. Aditya Mundra ITANo.632/Ind/2019 dated 13.01.2021 (I.T.A.T., Indore)
iii. Sunil Agrawal HUF ITA No. 434/Kol/2020 dated 03.12.2020 (I.T.A.T., Kolkata)
iv. Shweta Agrawal – ITA No. 280/IND/201 9 dated 21.12.2020(I. T.A. T., Indore)
v. GTC Industries Limited – [2017] 80 com 284 dated 07.03.2017 – (I.T.A.T., Mumbai (SB)
vi. Riaz Munshi – ITA no. 8314/DEL/2018 dated 11.03.2020 (I.T.A.T., Delhi)
vii. Dipesh Ramesh Vardhan – ITA No. 7648/Ind/2019 dated 11.08.2020 (I.T.A.T., Mumbai)
viii. Anoop Jain – [2020] 114 com 550 – dated 10.01.2020(I.T.A.T., Delhi)
ix. Vijay Ratan Mittal – ITA No. 3429 of 2019 dated 01.10.2019 (I.T.A.T., Mumbai)
x. Karuna Garg – [2019] 109 com 403 – dated 06.08.2019 – (I.T.A.T., Delhi)
xi. Vidhi Malhotra – [2019] 101 com 361 -dated 20.12.2018(I.T.A.T., Delhi)
xii. Saurabh Mittal – ITA No. 16 of 2018 – dated 29.08.2018 (I.T.A.T., Jaipur)
xiii. Pramod Kumar Lodha – [2018] 100 com 8 dated 16.07.2018 (I.T.A.T., Jaipur)
xiv. Rungta Properties – ITA No. 105 of 2016 dated 08.05.2017 (Calcutta HC)
xv. M/s. Alpine Investments – ITA No. 620 of 2018 – dated 26.08.2008 (Culcutta HC)
17. With regard to the claim that the assessee had fulfilled all the conditions of section 10(38) of the Act and the claim of LTCG is bonafide, lawful and complies with the provisions of section 10(38) of the Act and sale consideration received on the sale of these shares cannot be treated as income of the assessee, reliance placed on judgment of Hon’ble Apex Court in the Case of Dilip Kumar and Company & ors Civil Appeal No.3327 of 2007 dated 30.07.20 18 and the judgment of Hon’ble Bombay High Court in the case of Balmukund Acharya 310 ITR 310 (Bom).
18. counsel for the assessee also submitted that the provisions of section 68 of the Act are not applicable on the alleged transaction of sale of shares of a listed company on the recognized stock exchange. Identity is proved which in this case is Kotak Securities Limited through which equity shares of Kappac Pharma Limited are transferred from DMAT account of the assessee. Genuineness is proved as the shares were purchased during F.Y. 20 12-13 through a Private Limited Co. on offline basis and creditworthiness is proved with a fact that shares are sold on the recognized stock exchange through a registered stock broker and the identity of the purchaser of the shares is not revealed on the portal.
19. Thus, considering above facts and circumstances of the case submissions made, documents on record and judicial precedents counsel for the assessee prayed that addition made by the Ld. AO for the amount of gross sale consideration/net sale consideration/LTCG as income of the assessee deserves to be deleted and benefit u/s 10(38) of the Act for LTCG to be allowed.
20. Per contra, Ld. Departmental Representative (DR) vehemently argued supporting the finding of both the lower authorities and decisions/ judgments referred and relied by the Ld. CIT(A) and further submits that there was an abnormal increase in share prices within a short span of two year which was not commensurate with the financial growth of the company and therefore Ld. CIT(A) has rightly held that the alleged transactions are sham and bogus.
21. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions, paper book and plethora of judgments referred and relied by both sides. Common issue raised in all three appeal is genuineness of claim of Long Term Capital Gain as exempt income u/s 10(38) of the Act arising out of the transactions of sale of equity shares of Kappac Pharma Limited.
22. The assessees namely Prakash Javia HUF, Jayesh Kumar Javia HUF and Prajash Javia purchased equity shares of Kappac Pharma Limited totaling to 3000, 2000 & 3000 respectively in cash through offline mode from existing shareholder of Kappac Pharma Ltd. at Rs.36000/-, Rs.24,000/- & Rs.36,000/-. Subsequently, during the F.Y. 2013-14 all these equity shares were converted in DMAT form maintained by respective assessees with Kotak Securities Ltd. During F.Y. 2013-14 after holding the shares for more than 12 months, respective assessee(s) sold their holding of Kappac Pharma Ltd. through a registered broker namely Kotal Securities Ltd on the recognized stock exchange namely Bombay Stock Exchange Ltd and Long term Capital Gain calculated in each case have been shown in the income tax returns as exempt income u/s 10(38) of the Act.
23. During the assessment proceedings the assessing officer on the basis of report of the investigation carried out by the Investigation Wing of Income Tax Department at various brokers in other parts of the country, lack of information from the purchaser of equity shares sold by one of the assessee namely Prakash Javia HUF and raising doubt on the abnormal increase of the share price of Kappac Pharma Ltd. which in no way could termed as a fair market value looking to the financial position, gross sales and income shown by the listed company KPL and based on all these observations concluded that the alleged transactions of sale of equity shares of KPL are bogus, Kappac Pharma Ltd. is a penny stock company, and the assessee has adopted a colorable devise to convert unaccounted money into accounted money by arranging bogus
24. As far as, the contention that share prices of Kappac Pharma saw abnormal rise which is not commensurate to the financial results/position of the company, we find that this tribunal has dealt with this issue recently in the case of Aditya Mundra (supra) observing as follows:
Para 37 – “On the other hand all the relevant documents to prove the purchase and sale were before the Ld. A.O. Purchases were at the fair market value at Rs. 12/-. Sales have been effected through registered broker after payment of security transaction tax and sold at the prices appearing at the recognized stock exchange. Merely observing that the prices of the equity shares have been increased drastically cannot be a evidence in itself to treat the transactions as bogus. There are number of incidences where the share prices of certain listed companies increased drastically but that all depends on demand and supply of the equity share, perception of its growth and the market sentiments. Unless and until the company of which the equity shares are being traded is found to be involved in malpractices the financial results are not commensurate with the prices at the NSE/BSE portal and sufficient proofs are available showing the alleged company to be a bogus/penny stock or paper company, one cannot question the genuineness of transactions carried out on the portal of NSE/BSE which are under the control of Securities and Exchange Board of India.” [emphasis supplied]
25. The above finding of this Tribunal indicates that there are various other factors for the sudden rise and fall in the share prices of a listed company which are majorly linked to the market sentiments, performance of the sector, availability of shares i.e demand and supply, holding of the promoters, future prospects etc. In the instant case, nothing on record is available to show that any enquiry was conducted by department at the business premises of Kappac Pharma Ltd. and its involvement in this alleged racket of managing bogus LTCG. Kappac Pharma Ltd. is registered with Registrar of Companies and is still live at the portal of Registrar of All transfers of shares of particular listed company is well recorded in the Registrar of shareholders. Even the purchase of shares by assessee is directly from a shareholder company, being original allottee of equity shares of Kappac Pharma Ltd. which were subsequently transferred in the name of respective assessee(s).
26. We, further note that as far as conditions provided in section 10(38) of the Act are concerned the same are duly fulfilled in the instant case Section 10(38) of the Act reads as follows:
“any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust where –
a) The transaction of sale of such equity share or unit is entered into on or after the date on which Chapter V~~ of the Finance (No. 2) Act, 2004 comes into force; and
b) Such a transaction is chargeable to securities transaction tax under that Chapter ,,
27. From perusal of above section we observe that following conditions are to be satisfied to claim income exempt u/s 10(38) –
a. Asset transferred should be a long term capital asset
b. Asset transferred should be either equity share or units of equity oriented fund or units of a business trust
c. Transaction of sale of such equity share or units of equity oriented fund or units of a business trust is entered into on or after 01st October 2014
d. Securities transaction tax (STT) is paid (which is possible only when the transaction is carried out on a registered stock exchange)
28. Ongoing through the facts of the case, we find that the assets are in the nature of equity shares which are not part of a business stock and have been held for more than 12 months so will comes under the category of Long Term Capital Asset. The equity shares are sold through recognized stock exchange (Bombay Stock Exchange) and security transactions tax have been paid on this transaction.
29. Now coming to the part of purchase and sale: Purchase is off line and made in cash. Ld. AO has raised doubt on the purchases being made in cash but there is no bar under the law to make purchase in cash. In all these cases equity shares were purchase from Shah & Sons Propon Private Limited. PAN No. of the seller was provided before both the lower authorities. The seller namely Shah & Sons Propon Private Limited purchased equity shares in November 2010 and was originally allotted the shares by Kappac Pharma Ltd. which is a company registered at Mumbai. Genuineness of the documents namely share certificate placed page 10 of the paper book is not doubted. For sure the details of shareholder would be available on the portal of the Registrar of Company where annual returns are filed by the Companies. Further has this certificate being bogus then how could the shares are dematerialized. Because once a share are lodged for dematerialization the original share certificate is to be deposited and the correctness of the certificate is verified through the company which has issued the share certificate. Once the details are found to be correct the shares are dematerialized.
30. Now coming to the sale part: The assessee has opened DMAT account with Kotak Securities Ltd. which is known to be a reputed company engaged in the providing services as share broker. Kotal Security is registered with Bombay Stock Exchange. Sale is effected on the portal operated and controlled by Bombay Stock Exchange. The seller has no idea as to who is the buyer on the other side. On the portal the payment for the sale is received by broker which in this case is Kotak Security Limited who after deducting the brokerage and other applicable tax including Security Transactions Tax remits the balance amount in the bank account of the assessee which is registered in the DMAT Account. In the instant case, no flaw or any inconsistency has been found by the Revenue authorities with all these transaction of purchase and sale.
31. Further the aspect that whether Kappac Pharma Ltd is a ‘penny stock’ company or not has been dealt in detail by I.T.A.T., Kolkata Bench in the case of Yogendra Dalmia (supra) wherein the Tribunal after considering another decision of Bangalore Tribunal in the case Canara Bank vs. JCIT held the transaction from sale of equity shares of Kappac Pharma Limited as genuine and also allowed the claim of assessee of LTCG from the sale of equity shares of Kappac Pharma Ltd. and also deleted the alleged commission expenditure added by Ld. AO for arranging the bogus LTCG. The relevant extract of decision of Coordinate Bench Kolkata in the case of Yougendra Dalmia (supra) is reproduced below:
Para 6- “Next comes assessee’s latter appeal ITA No. 775/Kol/2018 seeking to reverse both the lower authorities action treating his sale proceeds amounting to Rs. 1,81,009/- derived from sale of shares in M/s GCM Securities Pvt. Ltd and Kappac Pharma Ltd. has to be in the nature of unexplained cash credits. Both the lower authorities have further disallowed the alleged commission expenditure @ 5% thereupon with coming to 1,81,009/- u/s. 69C of the Act. The CIT(A)’s detailed discussion under challenge to this effect reads as under:-………..1
Para 7- “We have given our thoughtful consideration to rival contentions. There can hardly be any dispute that assessee has placed on record his supportive documentary evidence comprising of relevant purchase bills of shares allotment, certified copies, contract notes, brokerage details etc. We put up a specific query as to whether any of entry operators searched or survey has quoted these assessees names or not before the departmental authorities. There is no such material in the case file indicating such as statement. I find that this co-ordinate bench’s decision in ITA No. 1918/Kol/2018 in Smt. Sangita Jhunjhunwala vs. ITO decided on 04.01.2019 has deleted similar bogus LTCG vide following detailed discussion in para 3 to 5 as under. “
Para 8 – “This tribunal’s yet another decision in (2017) 60 ITR (Trib) 1 (Bang) Canara Bank vs. JCIT holds that the estopple principle does not apply in income tax proceedings. We therefore reject Revenue’s arguments in support of impugned addition. We take into account all the relevant facts and circumstances to adopt the learned co-ordinate bench’s above extracted detailed reasoning mutatis mutandis to delete the impugned addition forming subject-matter of the instant appeal. Commission expenditure disallowance; if any, shall automatically follow suit as a necessary corollary. No other argument has been raised before us during the course of hearing. This assessee’s latter appeal ITA No. 775/Kol/2018 is allowed.” [emphasis supplied]
32. Records placed before us also shows that report of the investigation wing or any enquiry conducted from 3rd persons were not made available to the assessee which thus grossly violates the principles of natural justice. As the assessee never got opportunity to go through these reports this action of the lower authorities was not justified in view of ratio laid down by Hon’ble Supreme Court in the case of Sona Builders (supra) wherein Hon’ble Court held that:
Para 7 -” Having regard to the statutory limit within which the appropriate authority has to act and his failure to act in conformity with the principles of natural justice, we do not think we can remand the matter to the appropriate authority. We must set his order aside.
Para 8 – “The appeal is, accordingly, allowed. The judgment and order under appeal is set aside. The order of the appropriate authority dated 31-5-1 993 is quashed.” [emphasis supplied]
33. We, therefore, in the totality of facts and in view of the ratios laid down by Hon’ble Courts and decision of Coordinate Benches squarely applicable on the instant issue raised before us, are of the considered view the alleged transaction of purchase and sale of equity shares of Kappac Pharma Ltd. are not bogus as the respective assessee(s) have duly charged there onus to prove the genuineness of purchase and sale of equity shares of listed company KPL (listed in Bombay Stock Exchange) by placing necessary documents to prove that the purchase are directly from the shareholder and sold through a registered broker and nothing adverse has been found by the revenue authorities and KPL is not held to be a penny stock company.
34. Further, with regard to the alleged addition we find that the it is purely based on the report of the investigation wing carried out in the case of other persons finding no mention or the involvements of assessee(s) in any of such report and thus, the claim of the LTCG has been rightly made as exempt income u/s 10(38) of the Act. We, thus, set aside the finding of the Ld. CIT(A) in all the instant appeals and direct the Ld. Assessing Officer to allow the claim of LTCG made u/s 10(38) of the Act made by the respective assessee(s) and also delete the disallowance of brokerage expenses of Rs.61,380/- made in the case of Prakash Javia.
35. In the result, all grounds raised by the assessee(s) are allowed and appeals filed by the assessee in ITANo. 464,465 & 466/Ind/2019 are decided in favour of the assessee and against the revenue.
Order was pronounced as per Rule 34 of the I.T.A.T. Rules 1963 on 25. 05. 2021
