The Principal Commissioner Of Income Tax, Vadodara 1 v. Muktaben Nishantbhai Patel

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 294 of 2021With R/TAX APPEAL NO. 295 of 2021 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 VersusMUKTABEN NISHANTBHAI PATEL ========================================================== Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1MS VAIBHAVI K PARIKH(3238) for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 12/04/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.This tax appeal under Section 260-A of the IncomeTax Act, 1961 (for short “the Act, 1961”) is at the instanceof the revenue and is directed against the order passed bythe Income Tax Appellate Tribunal, Surat Bench, Suratdated 07.01.2021 in the ITA No.7/SRT/2019 for theA.Y.2014-15. The revenue has proposed the followingquestion of law for the consideration of this Court; “(a) Whether in the facts and circumstances of thecase, learned ITAT has erred in law in deletingaddition of Rs. 29,08,385/- u/s 68 and addition ofRs.2,87,047/- u/s 69C of the Income-tax Act, 1961 byholding that the Assessing Officer had failed to bringany cogent or admissible evidence on record?“ 2.We have heard Mr. Varun Patel, the learned standing counsel appearing for the revenue and Mr. TusharHemani, the learned senior counsel assisted by Ms.Vaibhavi Parikh, the learned advocate appearing for therespondent-assessee. 3.It appears from the materials on record that duringthe course of the assessment proceedings, the AssessingOfficer noticed that the assessee had declared long termcapital gain on the sale of shares at Rs.29,08,385/- andclaimed the same as exempt under Section 10(38) of theAct. The department came to know through theInvestigation Wing that the assessee had indulged inreceiving accommodation entries through sale of pennystocks only with a view to evade the capital gain taxation.The respondent-assessee had purchased 35,500 shares ofone company by name M/s. Sun and Shine Worldwide Ltdon 30.10.2012 for Rs.19,525/- per share. The said shareswere sold between February, 2014 and March, 2014 forthe price ranging between 22.90 and Rs.25.25 for a totalsale consideration of Rs.29,08,385/-. The Assessing Officertook the view that the assessee was not in a position togive any satisfactory explanation regarding the physicaldelivery of the shares etc. The Assessing Officer also tooknotice of the fact that the overall financial condition of thecompany was poor. The Assessing Officer further tooknotice of the fact that the entry operators had acceptedthe modus operandi of providing bogus LTCG through thepurchase and sale of shares of few companies. 4.The CIT (A) dismissed the appeal filed by therespondent-assessee holding as under; 4.The CIT (A) dismissed the appeal filed by therespondent-assessee holding as under; “5.14The assessee has not at all been able toadduce cogent evidences in this regard. There is noeconomic or financial justification for the sale price ofthese shares. The so called purchaser of theseshares has not been identified despite efforts of theAO. The broker company through which shares weresold did not respond to queries in this regard. Hencethe fantastic sale price realization is not at allhumanly probable, as there is no economic orfinancial basis, that a share of little known companywould jump from 0.55 to Rs.25.25. In thesecircumstances, I do not find any infirmity in theorder of the authorities below. Accordingly, I affirmthe same and decide the issue against the assesseerespectfully following this decision. Considering thefacts of the case, I have no hesitation in holding thatthe transactions in purchase and sell of shares ofM/s. Sun Shine Worldwide Ltd. for Rs.29,08,365/-were sham transactions intended to claim wrongexemption u/s.10(38) of the Income Tax Act and,therefore, I uphold the addition of Rs.29,08,385/-made by the Assessing Officer. This ground of appeal(on merits) is also dismissed. 6.0The next issue regarding payment ofcommission paid to the entry operator/broker forarranging the bogus LTCG entry of Rs.2,87,047/-. Theappellant has paid commission @ 0.10% to the entryoperator/broker for purchase and sale of shamtransactions to bring unaccounted money in theguise of exempted long term capital gains. Since, thecommission amount paid on the bogus purchase andsale of penny stock scripts is an integral part ofentire game plan, the action of the A.O. is upheld.” 5.The respondent-assessee went in appeal before theTribunal. The Tribunal, while allowing the appeal filed by the respondent herein, held as under; “We note that there is no dispute regarding date ofpurchase of shares. Price of the shares Rs.2- /insteadof Rs.0.55/- per share, confirmed from the party. Theshares which the assessee had acquired were lateron demated and then the assessee sold the shares atstock exchange through registered stock broker aftermaking payment of STT. Neither the Stock Exchangeor SEBI has disputed the assessee’s transaction norwas any action against the assessee’s broker takenby BSE or SEBI. The assessee’s dealings in shares aresupported by the contract notes issued by broker aswell as demat account. Genuineness of contractnotes or demant accounts have not been disputedeven in the show cause notice by the assessingofficer. The Ld Counsel also stated that in the course ofassessment proceedings, the Assessing Officer madeinquiry with M/s. Corporate Commodity BrokerPrivate Ltd. from whom assessee purchased shares.He stated that he sold the shares at Rs.2/- not atRs.0.55/-. This doesn’t help the revenue as CorporateCommodity Broker Private Ltd. has only confirmedthe sale of the shares to the assessee. Assesseepurchased the shares on 30.10.2012 relevant to A.Y.2013-14. No adverse inference was drawn in thisregard in the Assessment order u/s. 143(3) r.w.s. 147on 27.12.2017, by the assessing officer in the case ofassessee. In order to prove the Sale of shares of Sun & ShineWorldwide Ltd., assessee filed the followingdocuments before the assessing officer, viz: LedgerAccount of Tradebulls Securities Pvt. Ltd, ContractNotes of Tradebulls Securities Pvtl Ltd and BankStatement. In order to prove purchases of shares,assessee filed the following documents, viz: Contraconfirmation of broker M/s. Corporate CommodityBroker Private Ltd, Share Certificate, Share Transfer In order to prove the Sale of shares of Sun & ShineWorldwide Ltd., assessee filed the followingdocuments before the assessing officer, viz: LedgerAccount of Tradebulls Securities Pvt. Ltd, ContractNotes of Tradebulls Securities Pvtl Ltd and BankStatement. In order to prove purchases of shares,assessee filed the following documents, viz: Contraconfirmation of broker M/s. Corporate CommodityBroker Private Ltd, Share Certificate, Share Transfer Form, Debit Note and Cash Receipt. The paymentswere received through account payee cheque andtransaction was done through recognized stockexchange. The inflow of shares is reflected by wayof physical share certificate and demat account. Theshares were transferred through demat account.There is no evidence that the cash was recycled backto the assessee. The assessing officer has failed tobring any cogent evidence on record to show thatthese documents and evidences filed by theassessee are false. The assessee merely acted on the basis of suchmarket information and happened to getphenomenal gain. It could have been otherwise aswell. The rags to riches story in the stock market aregalore. It has been submitted that the alleged,circumstantial evidence and material has led theAssessing Officer to believe that the real is not theapparent. In the absence of any link between theassessee and the alleged, admissions of the directorsand brokers, human probability is being used as avague and convenient medium for the department’sconjectures. To draw an adverse inference withoutany admissible evidence on record, is bad in law. TheHon’ble Supreme Court in the case of Omar SalavMohamed Sait reported in (19S9) [37 ITR 151] (SC)had held that no addition can be made on the basisof surmises, suspicion and conjectures. In the case ofCIT(Central), Kolkata vs. Daulat Ram Rawatmullreported in [87 ITR 349], the Hon’ble Supreme Courtheld that, the onus to prove that the apparent is notthe real is on the party who claims it to be so. Theburden of proving a transaction to be bogus has tobe strictly discharged by adducing legal evidences,which would directly prove the fact of bogusness orestablish circumstance unerringly and reasonablyraising an interference to that effect. The Hon’bleSupreme Court in the case of Umacharan Shah &Bros. Vs. CIT [37 ITR 271] held that suspicionhowever strong, cannot take the place of evidence. In the light of the discussions that have precededand for the reasons alluded we are of the view thatthe addition made by the assessing officer andconfirmed by the Ld. CIT(A) needs to be deleted.Accordingly, we delete the additions made byassessing officer in case of Smt. Muktaben N. Pateland Shri Nishant K. Patel in the assessment year2014-15.” 6.Having regard to the aforesaid finding of factsrecorded by the Tribunal, we are not inclined to interferein this appeal. We are of the view that the question oflaw formulated by the Revenue is more on facts ratherthan on law. It cannot be said to be a substantial questionof law. 7.In the result, this appeal fails and is herebydismissed. 8.In view of the aforesaid, the connected Tax AppealNo.295 of 2021 also stands dismissed. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Vahid