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Case Law Details

Case Name : Achal Gupta Vs ITO (ITAT Lucknow)
Appeal Number : I.T.A. No. 501/Lkw/2019
Date of Judgement/Order : 16/12/2020
Related Assessment Year : 2015-2016
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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.

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