Nishantkantilal Patel Vs ITO (ITAT Surat)
We note that there is no dispute regarding date of purchase of shares. Price of the shares Rs.2/- instead of Rs.0.55/- per share, confirmed from the party. The shares which the assessee had acquired were later on demated and then the assessee sold the shares at stock exchange through registered stock broker after making payment of STT. Neither the Stock Exchange or SEBI has disputed the assessee’s transaction nor was any action against the assessee’s broker taken by BSE or SEBI. The assessee’s dealings in shares are supported by the contract notes issued by broker as well as demat account. Genuineness of contract notes or demat accounts have not been disputed even in the show cause notice by the assessing officer.
The Ld Counsel also stated that in the course of assessment proceedings, the Assessing officer made inquiry with M/s. Corporate Commodity Broker Private Ltd. from whom assessee purchased shares. He stated that he sold the shares at Rs.2/- not at Rs.0.55/-. This doesn’t help the revenue as Corporate Commodity Broker Private Ltd. has only confirmed the sale of the shares to the assessee. Assessee purchased the shares on 30.10.2012 relevant to A.Y. 2013-14. No adverse inference was drawn in this regard in the Assessment order u/s.143(3) r.w.s 147 on 27.12.2017, by the assessing officer in the case of assessee.
In order to prove the Sale of shares of Sun & Shine Worldwide Ltd., assessee filed the following documents before the assessing officer, viz: Ledger Account of Tradebulls Securities Pvt. Ltd, Contract Notes of Tradebulls Securities Pvt. Ltd and Bank Statement. In order to prove purchases of shares, assessee filed the following documents, viz: Contra confirmation of broker M/s. Corporate Commodity Broker Private Ltd, Share Certificate, Share Transfer Form, Debit Note and Cash Receipt. The payments were received through account payee cheque and transaction was done through recognized stock exchange. The inflow of shares is reflected by way of physical share certificate and demat account. The shares were transferred through demat account. There is no evidence that the cash was recycled back to the assessee. The assessing officer has failed to bring any cogent evidence on record to show that these documents and evidences filed by the assessee are false.
The assessee merely acted on the basis of such market information and happened to get phenomenal gain. It could have been otherwise as well. The rags to riches story in the stock market are galore. It has been submitted that the alleged, circumstantial evidence and material has led the Assessing Officer to believe that the real is not the apparent. In the absence of any link between the assessee and the alleged admissions of the directors and brokers, human probability is being used as a vague and convenient medium for the department’s conjectures. To draw an adverse inference without any admissible evidence on record, is bad in law. The Hon’ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) [37 ITR 151] (SC) had held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in [87 ITR 349], the Hon’ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon’ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT [37 ITR 271] held that suspicion however strong, cannot take the place of evidence.
In the light of the discussions that have preceded and for the reasons alluded we are of the view that the addition made by the assessing officer and confirmed by the ld CIT(A) needs to be deleted. Accordingly, we delete the additions made by assessing officer in case of Smt. Muktaben N.Patel and Shri Nishant K Patel in the assessment year 2014-15.
FULL TEXT OF THE ORDER OF ITAT SURAT
The Captioned four appeals filed by the different assessees, pertaining to the Assessment Year 2013-14 and 2014-15, are directed against the separate orders passed by the ld. Commissioner of Income Tax (Appeals)-3, Vadodara [in short “the ld. CIT(A)”], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) r.w.s 147 of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].
2. Since the issue involved in these four appeals are common and identical, therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
3. First we shall adjudicate the appeals pertaining to Assessment Year 2013-14. For the sake of convenience, the facts as well as grounds of appeal narrated in the assessee’s appeal in ITA No.05/SRT/2019, for AY.2013-14, in the case of Shri Nishant Kantilal Patel, is taken as the lead case.
4. The grounds of appeal filed by the assessee as per its lead case in ITA No.05/SRT/2019, for AY.2013-14, are as follows:
“(1).On the facts and circumstances of the case as well as law on the subject, the learned assessing officer has erred in reopening assessment u/s 147 of the Act by issuing notice u/s 148 of the I.T. Act, 1961.
(2) On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the assessing officer in disallowing the exemption of Rs.20,76,924/-claimed by assessee u/s.10(38) on account of Long-Term Capital Gain and treating it as the accommodation entry and thereby making addition u/s. 68 of the Act.
(3) On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of Assessing Officer in making addition of Rs.1,03,846 /- on account of unexplained expenditure u/s.69C of the Act for commission payment for procuring the alleged accommodation entry.
(4) It is therefore prayed that the above addition made by the assessing officer may please be deleted.
(5) Assessee craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
5. We note that in the grounds of appeal, as noted above, the assessee has challenged the reassessment proceedings under section 147/148 of the Act (technical issue) and simultaneously he also raised the grounds on merits. However, at the time of hearing, the main grievance of the assessee has been confined to the reassessment proceedings under section 147/148 of the Act (technical issue).
6. The assessee before us is an individual and employed in Timber related Industries. He derived income from other sources and Long Term capital gain during the year under consideration. The case of the assessee was reopened under section 147 of the Act, since information was received from Investigation Wing of Kolkata, which had carried out survey/ search operations wherein it was established that in large number of penny stock companies the share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gain/Loss. The assessing officer observed that the information as per EPS / ITS / Penny Stock reflected that the assessee had shown Long term Capital Gain of Rs.20,76,924/- on which STT has been paid, which is claimed as exempt and the scrip Global Securities Ltd, is one of the Penny Stock companies utilized by Brokers for providing accommodation entries. Therefore, the assessee`s case was reopened under section 147 of the Act to examine the suspicious sale transaction in shares (penny scrip). A notice under section 148 of the Act was issued by assessing officer on 17.2.2017 after obtaining necessary approval from the higher authorities. The assessee, vide his Letter dated 31.3.2017, has requested the assessing officer to treat the original return of income filed on 29.03,2014, declaring total income of Rs.7,77,230/- as return of income filed in response to notice under section 148 of the Act. Thereafter, reasons for reopening the case were furnished to the assessee, vide letter dated 10.4.2017.
7. The reasons for reopening the case of the assessee was to examine the earning of suspicious capital gain from transaction in penny stock. In the reassessment proceedings, the assessing officer examined the assessee`s case on merits. The assessing officer noticed that assessee had claimed exemption of Long Term Capital Gain (for short ‘LTCG’) on of the scrip of Global Securities Ltd. On perusal of the assessment records of earlier years of the assessee it was noticed that such a huge amount of exempted capital gain has never been earned by the assessee in earlier years. During the course of scrutiny, it was noted that assessee had shown income from LTCG from sale of shares of Global Securities Ltd amounting to Rs.20,76,925. This LTCG was claimed exempt as per Schedule EI in the return of income filed for the AY.2013-14. On going through the documents filed by the assessee it was observed that the assessee purchased the shares of Global Securities on 1.11.2011, the details of the same is given below:
