Achal Gupta Vs ITO (ITAT Lucknow)
Documents clearly demonstrates that assessee had purchased shares through Brokers for which the payment was made through banking channels. The assessee had sold shares through authorized stock broker and payment was received through baking channels after deduction of STT. On Page 16 which is a copy of Bank account of assessee there is evidence of payments to Suktara Trade link amounting to Rs.8,25,000/- for purchase of 25000 equity shares of CCL Ltd. The bill of broker of Suktara Trade Link is at Page 17. The evidence of sale of such shares through Edelwise financial Advisors Ltd showing deduction of service tax and securities transaction tax is placed at P.B. 18 to 23. Paper book pages 32 shows that shares of CCL International Ltd. were in the demat account of assessee and the fact of these shares having been transferred to the account of brokers M/s Edelwise Financial Advisors on account of sale is also apparent from this paper. The transaction statement placed in paper book also proves that assessee was holding a number of scrips. All the documents clearly demonstrate that assessee did earn long term capital gain and moreover the Assessing Officer has not doubted any of the above documents. The only objection raised by the authorities below is that the script from which the assessee had earned Long Term Capital Gain has been held by the Investigation Wing of the Revenue to be a paper entity and which has further held that this scrip was being used for creating artificial capital gain. We find that Hon’ble Tribunal in the case of Reeshu Goel has examined this aspect and after recording detailed findings has held this script to be a genuine script and has held that the scrip is not a paper entity.
The entire premise of the Assessing Officer for treating the entire transaction to be a bogus Long Term Capital Gain and making addition u/s. 68 is that, firstly, M/s. CCL International Ltd. did not have much financial worth to justify such a price rise; secondly, the SEBI had suspended the trade of the share for a brief period; thirdly, he has pointed out the history of price rise between 06.02.2010 to 25.11.2014 and then has drawn adverse inference that price of these shares were manipulated and rigged in the stock exchange which was solely to provide accommodation entries to the various parties; and lastly, he has also referred to certain inquiry report of Investigation Wing Kolkata during the course of which certain brokers have admitted that they had provided accommodation entries in the scrip of M/s. CCL International. But nowhere in the entire assessment order, there is any reference to any material or evidence that assessee or assessee’s broker have been found to be indulged in any kind of accommodation entry in this scrip. No inquiry whatsoever has been made from the broker of the assessee. Further, during the period in which assessee had purchased the shares and had sold them whether the SEBI had suspended the trading has not been mentioned, in fact, Assessing Officer himself mentions tha t there was brief suspension in the year 2010, whereas the assessee has purchased shares in the year 2011 and sold them in the year 2012. Coming to the financials, as culled out from the records, the revenue from the operation of M/s. CCL International Ltd. from March, 2010 to March, 2012 was between Rs. 55.25 crore to Rs. 79 crore. Thus, it cannot be held that it was mere a paper entity. From a bare perusal of the history of listing and trading of shares and the quote of Bombay Stock Exchange as quoted in the assessment order, it clearly reflects that as on 06.02.2010, the closing price was Rs. 50 and there was a steady increase and within the period of 4 years the price had reached up to Rs.609 on 25.11.2014. Nowhere, it has been pointed out that the rise was beyond the cap laid down by the SEBI, because the price of the scrip cannot rise beyond the cap prescribed by the SEBI. If the shares have been purchased and sold from the stock exchange on a quoted price with proper contract number, trade time and after paying STT, then it is very difficult to assume that the sale proceeds received from sale of such shares is bogus, especialy when purchase of shares are not in dispute. This inter alia means assessee was in possession of shares which were also dematerialised. To prove that such a transaction was in the nature of bogus or colourable transaction, there has to be some inquiry or material to nail the assessee tha t she was some kind of a beneficiary in some accommodation entry operation. No defect has been pointed out in the documents submitted by the assessee nor has the broker of the assessee been inquired upon. Simply relying upon the general modus operandi and statement of some brokers recorded by the Kolkata Investigation Wing does not mean that al the transactions undertaken of the scrip M/s. CCL International Ltd. through the country by millions of subscribers are bogus. Thus, in absence of any material or evidence against the assessee, we do not find any reason as to why the claim of Long Term Capital Gain from sale of such share should be denied. Consequently, the addition on account of commission is also deleted.
FULL TEXT OF THE ITAT JUDGEMENT
This is a group of four appeals filed by different assessees against separate orders of learned CIT(A) all dated 26/06/2019. In all these appeals similar grounds have been taken and therefore, these were heard together and for the sake of convenience, a common and consolidated order is being passed.
2. At the outset, Learned counsel for the assessee submitted that in these appeals there is a delay of four days in filing the appeals and which had occurred as the assessee counted the prescribed period from the date of physical delivery of order instead of counting it from the day when it was delivered electronically. Learned counsel for the assessee submitted that if the date of service is considered as having received through e-mail then there is delay of four days and if the physical receipt of order of learned CIT(A) is to be considered then there is no delay. Therefore, it was submitted that little delay if any had occurred due to confusion and it was prayed that the delay in filing the appeal be condoned. Learned D. R. did not have objection for condoning the delay in filing the appeals. Finding the reason for delay in filing the appeals reasonable, the delay was condoned and the Learned counsel for the assessee was asked to proceed with his arguments.
3. Learned counsel for the assessee submitted that he will be arguing the appeal in I.T.A. No. 501/Lkw/2019 in the case of Shri Achal Gupta and arguments in respect of all other appeals will be same as the same issue is there in all other appeals. Learned counsel for the assessee submitted that the assessee had purchased shares of CCL International Ltd. and had made the payment for purchase of such shares through cheques and these were purchased from Suktara Trade Links Pvt. Ltd. Learned counsel for the assessee submitted that the shares were held in demat account and after holding for a period of about 11/2 years, the same were sold through registered broker M/s Edelweiss Broking Limited through screen based trading and the proceeds were credited to the bank account of the assessee. It was submitted that the Assessing Officer, on the basis of some report of Investigation Wing, Kolkata, which did not relate to the assessee, held that the shares of CCL International Ltd. was a penny stock and assessee had managed Long Term Capital Gain through managed transactions and therefore, he held the capital gain to be bogus and made the addition u/s 68 of the Act. Learned counsel for the assessee submitted that Hon’ble Delhi Tribunal in the case of Reeshu Goel vs. Income Tax Officer in I.T.A. No.1691/Del/2019, vide order dated 07/10/2019, has examined the same share of CCL International Ltd. and after recording detailed findings has held the same to be a genuine company and has further held that the company was not a mere paper entity. In this respect, Learned counsel for the assessee invited our attention to para 16 of the order wherein the detailed findings have been recorded. Learned counsel for the assessee further submitted that while recording the findings the Hon’ble Tribunal has considered various other cases decided by various other Benches wherein the same script has been held to be genuine. Therefore, it was prayed that the appeals of the assessee may be allowed by following the above Tribunal order. It was submitted that other than the objection of the company being a penny stock, there was no other objection by the authorities below and therefore, the appeals of the assessees may be allowed. As regards the facts of the present appeal, Learned counsel for the assessee invited our attention to pages 1 to 46 where all the details relating to purchase, sale and fact of having made payments and receiving payment through bank account were placed. Learned counsel for the assessee further submitted that the broker of the assessee was not investigated and neither the broker examined by the Investigation Wing made available to the assessee for cross examination and therefore, also the addition sustained by learned CIT(A) is not sustainable.
4. Learned D. R., on the other hand, vehemently argued that there was a racket of bogus capital gain which was unearthed by the Investigation Wing of the Revenue and after recording statement of various brokers, some scripts including the script traded by the assessee was held to be a penny stock and paper entity and therefore, the Assessing Officer has rightly disallowed the claim of the assessee. It was submitted Hon’ble Delhi High Court in the case of Udit Kalra vs. Income Tax Officer, I.T.A. No.220/2019, vide order dated 08/03/2019 has dismissed the appeal of the assessee under similar facts and circumstances. Learned D. R. further submitted that facts regarding this script being a penny stock and paper entity was already there in the possession of the Revenue and therefore, the authorities below have rightly made and sustained the addition. Learned DR further stated that before learned. CIT(A) no body appeared and therefore the case may be set aside to him and assessee can make his submissions regarding non confrontation of statements of brokers.
5. Learned counsel for the assessee, in his rejoinder, submitted that Hon’ble Tribunal in the case of Reeshu Goel has considered the case law of Udit Kalra and moreover it was submitted that the decision of Hon’ble High Court do not have precedential value as the Hon’ble High Court has dismissed the appeal of the assessee by holding that no substantial question of law arises. It was further submitted that I.T.A.T. Delhi in the case of Smt. Karuna Garg in I.T.A No. 1069 and in the case of Swati Luthra has distinguished the judgment in the case of Udit Kalra. As regards the non appearance of assessee before learned. CIT(A), the Learned A. R. submitted that assessee had nothing to say before learned. CIT(A) as all details have already been filed with Assessing Officer. It was submitted that learned CIT(A) has passed the order on merits and now after the passing of order by Delhi Tribunal in the case of Reeshu Goel, the case of assessee has become fully covered in his favour and therefore it was prayed that on merits the case of the assessee may be allowed.
6. We have heard the rival parties and have gone through the material placed on record. We find that Ground Nos. 1 to 4 were not passed by Learned A. R. as he requested to pass the order on merits and therefore, same are dismissed as not pressed. Ground Nos. 5 to 8 relates to the addition under dispute regarding denial of exemption of long term capital gain. Ground No. 9 and 10 are regarding addition u/s 69 of the Act which the Assessing Officer had made on the basis that assessee must have paid some commission for arrangement of bogus capital gain. The facts in brief are that assessee sold shares of CCL International Ltd. and earned long term capital gain. In support of long term capital gain the assessee filed before Assessing Officer the following documents (which is part of the paper book):
