ACIT, CIRCLE-4, Nagpur V. SHRI VINOD BALBHADRA GOENKA, Nagpur

ITA 204/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2232 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 07-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Capital asset; Business income; Revision of order; Charitable institution; Principle of natural justice; Question of law; Accommodation entries; Sham transactions; Capital Gains
• Section: 131; 68; 56; 263; 69C; 143(3); 153A; 260A; 64; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 204/NAG/2017 Assessment Year: 2014-15 The ACIT Circle-4 Nagpur Vs. Shri Vinod Balbhadra Goenka 247, Nandanvan Layout Nagpur PAN No.:AANPG 6841 N Appellant Respondent Revenue by :Shri Piyush Kolhe (CIT-DR) Assessee by: Shri K.P. Dewani, Adv Date of Hearing: 28/04/2022 Date of Pronouncement: 28 /06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. This is an appeal by Revenue against order of learned Commissioner of Income Tax (Appeals)-4, Nagpur dated 30/03/2017 in Appeal No.CIT(A)- 4/198/16-17 for the assessment year 2014-15. The grounds raised by the Revenue in this appeal are as under: “i. Whether on the facts and circumstances of the case of CIT(A) was right in holding that the transaction of sale of shares of “M/s. Out of City Travel Solutions Ltd.” is genuine only because the transactions were properly documented? ii. The Ld. CIT(A) erred in ignoring the findings of the Investigation Wing, Calcutta, that the shares were transferred to the beneficiary at a very nominal price through preferential allotment or off-line sales and the prices of these shares are rigged by the dummy operators. 2 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA iii. The Ld. CIT(A) erred in ignoring the findings of the SEBI, holding that SEBI orders are against companies and not against individual traders, ignoring the fact that the SEBI order clearly brings out the modus operandi employed by the company “M/s. Out of City Travel Solutions Ltd.” to route unaccounted money back to the books of the beneficiaries. iv. The Ld. CIT(A) erred in holding that the transactions are genuine just because the payment was made through banking channel and shares were demated. v. The Ld. CIT(A) erred in ignoring the fact that the penny scrip without any fundamentals had humongous gains defying logic or human probabilities as held in the Apex Court’s decision in the case of CIT vs. Durga Pasad More. vi. The Ld. CIT(A) erred in deleting the addition made u/s 69C on account of unexplained expenditure holding the there is no evidence of the same, and also ignoring the fact that the assessee had to incur some expenditure to get the artificial gains. vii. The Ld. CIT(A) erred in treating the sale of land as “Capital Gain” when in the 3CD report and in the statement recorded of the assessee, he clearly states that he is in the business of selling land. viii. The Ld. CIT(A) erred in relying on a decision of the Hon’ble ITAT, Nagpur Bench where the facts were totally different from the facts of this case. ix. Any other ground that may be raised at the time of hearing.” 2. The brief facts of the case is that assessee is an individual and has filed the return of income for the Asstt. Year 2014-15 on 14/11/2014 declaring total income of Rs.99,93,450/-. The case was selected for limited scrutiny through CASS. During the course of scrutiny proceedings Assessing Officer noticed that assessee has earned exempted long term gain u/s 10(38) of I.T. Act 1961 3 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA amounting to Rs.5,27,42,518/- on sale of 2,00,000 number of shares of M/s. Out of City Travel Solutions Limited. Details of sale of shares has been tabulated on Page 2 of the assessment order. 3. In assessment order the A.O. has referred to Investigation in Kolkata conducted by Investigation Wing of the Income Tax Department on the issue of long term capital gain. The A.O. has discussed modus operandi for arranging long term capital gain adopted by various assessees. The A.O. has discussed findings and conclusion at page 44 onwards to conclude that LTCG booked by assessee is pre-arranged method to evade tax. The A.O. has discussed price rigging based upon analysis of increase in share values. The A.O. has discussed role of share brokers in arranging long term capital gain. The Assessing Officer has recorded statement u/s 131 of the assessee which is reproduced by the A.O. on Page 20 to 27 of the assessment order. The Assessing Officer examined the scope of section 68 of I.T. Act 1961 referring to various judgements and case laws and concluded that sale proceeds of shares is liable to be assessed as unexplained cash credit u/s 68 of I.T. Act 1961. Assessing Officer accordingly made addition at Rs.5,73,42,518/- being sale proceeds of shares to the income declared. 4 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 4. The A.O. has made addition u/s 69C of I.T. Act 1961 at Rs.28,67,126/- as alleged expenditure on account of commission paid for bringing back money in his books as bogus long term capital gain. The A.O. has computed the aforesaid sum as 5% of sale proceeds of share reflected in books of account. 5. During the previous year relevant to Asstt. Year 2014-15, the assessee has sold properties and surplus arising on the same has been declared as long term capital gain. The investment made by assessee is recorded in books of account as investment being capital assets. The A.O. has referred to statement of assessee as reproduced in assessment order at Page 20 to 27 to conclude that assessee has admitted that he is carrying on business in Real Estate. Hence he held that income/gain on selling of immovable properties is liable to be assessed as business income. Accordingly, the A.O. assessed surplus arising on sale of immovable properties as income under the head “Income from Business & Profession”. 6. Against the order passed by the Assessing Officer, assessee appealed before learned CIT(A) wherein detailed submission were made to submit that various additions made in the assessment framed are unjustified. The learned CIT(A) has dealt with the facts and evidences on record and discussed legal precedents extensively while granting relief in the case of assessee 5 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 7. Aggrieved by the order of ld. CIT (A), now Revenue is in appeal before us on the grounds of appeal mentioned hereinabove . 8. Ground 1 to 5 of appeal are interlinked and interrelated and relates to challenging order of ld CIT (A) allowing the relief in case of assessee by deleting the addition made by A.O on account of unexplained cash credit u/s 68 of I.T Act 1961. The assessee has made detailed written submission before the ld. CIT(A) along with legal position on the subject which is reproduced in appellate order. The ld. CIT(A) in his appellate order held as under: “6. I have considered the assessment order, the ground of appeal, assessment record and the submission made by the appellant and find substantial force in the same. The evidence placed on record is considered. The brief facts in case of appellant are that appellant in return of income had declared long term capital gain arising out of sale of shares of company M/s. Out of City Travel Solutions Ltd. The shares of aforesaid company are listed at Bombay Stock Exchange and were being regularly traded. The appellant had purchased 2 lacs shares of said company in preferential allotment during Asstt. Year 2013-14. The investment in purchase of shares was duly recorded in books of account as investment in shares. The shares were allotted on 20.10.2012 and were transferred to DMAT account on 19.12.2012. The payment for same has been made through banking channels and the same is reflected in the bank statement of the appellant. The regular assessment for Asstt. Year 2013-14 was completed by A.O. on 01/03/2016 wherein the investment made in purchase of shares has been accepted without inviting any adverse observations. 6.1 The A.O. in assessment order by referring to investigation by Directorate of Investigation, Kolkata and statement of appellant recorded in the course of appellate proceedings, low profitability of company and by referring to orders passed by SEBI in case of M/s. Moryo Industries Ltd. 6 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA has concluded that long term capital gain booked by appellant is pre arranged method to evade tax and laundering of money. A.O. has referred to various judgments and GIST of such decisions at pages 48 to 54 to draw support for the conclusion that the transaction in respect to long term capital gain on sale of shares made by appellant is bogus. A.O. has thus finally concluded that sale proceeds of shares is liable to be assessed as unexplained cash credit u/s 68 of Income Tax Act 1961. The A.O. accordingly has made addition of Rs.5,73,42,518/- to the income declared. 6.2 The shares held by appellant in Asstt. Year 2013-14 have been sold in open market on screen based trading at BSE during the period from Dec. 2013 to Jan. 2014. The details of sale have been reproduced in assessment order at pages 12 to 14. The details as reproduced in assessment order indicate the time of trade as well as market rate at which the aforesaid transaction has been completed. The aforesaid transaction in respect to sale of shares is corroborated by contract notes of the registered broker which were also placed on record before A.O. and also before me in the appellate proceedings. The genuineness of contract notes is beyond doubt. The perusal of contract note indicates that security transaction tax has been paid on the transaction in respect to sale of shares by appellant. In the course of assessment proceedings the ledger account of appellant with registered broker wherein sale proceed of shares were being credited and remittance of same to the account of appellant through proper banking channel was reflected. The genuineness of account of assessee with registered broker is also beyond doubt. A.O. scanned and pasted graph to indicate activity of shares trading in respect to company in which appellant has made investment. The aforesaid graph pasted in assessment order is at page 8. The aforesaid observation in the assessment order demonstrates that the aforesaid shares are being regularly traded at BSE. 6.3 It is seen that in order to establish the genuineness of transaction appellant has submitted the copy of Demat account wherein the shares purchased by appellant are properly entered and shares have been sold in the open market at BSE through registered broker and contract note for sale of shares has been submitted. The contract notes and documents issued by registered broker clearly demonstrate that security transaction tax has been paid in respect to transaction of sale of shares by appellant. 7 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA The evidence as to allotment of shares was placed before A.O. and before me in appellate proceedings. The ledger account of appellant in books of broker along with the bank statement of appellant corroborates the transaction of sale of shares. Onus to explain the transaction of sale of shares has been satisfactorily discharged to explain the transaction of sale of shares on which long term capital gain has been declared in return. Perusal of assessment order does not show that there is any material or evidence on record to impeach the genuineness of transaction of sale of shares by appellant. A.O. has merely drawn adverse inference on by observing modus operandi and making general observations. The A.O. has not brought any specific credible evidence on record which discredits the share transaction of appellant. 6.4 It is seen that A.O. has assessed the sale proceed of shares as unexplained credit u/s 68 of Income Tax Act 1961. The acquisition of shares of the company are not disputed by A.O. and it is not the case of A.O. that the shares acquired are still held by appellant as investment. On above undisputed factual position A.O. could not have concluded that sale proceed of shares are unexplained credit and liable to be assessed u/s 68 of Income Tax Act 1961 A.O. in assessment order has observed that trading transaction of company have been suspended in 2016. The transactions of appellant are during the year 2013 & 2014. In view of above nothing adverse can be drawn in respect to observation of A.O. in the assessment order. 6.5 The issue as to assessment of long term capital gain on sale of shares has come up for consideration in case of Shri Kamal Kumar Agrawal and his family members wherein A.O. in the assessment framed u/s 153A of Income Tax Act 1961 pursuance to search action u/s 132(1) on 20/01/2005 had concluded that the sale proceeds in respect to sale of shares is bogus and thus same were liable to be assessed u/s 68 of Income Tax Act 1961. The order passed by A.O. was challenged in appeal. The aforesaid disputed issue has been considered by various appellate authorities from CIT(A) onwards. The matter in case of Shri Kamal Kumar Agrawal has travelled from CIT(A) to that before Hon’ble Apex Court in SLP. The appellate orders have been relied upon by the appellant to draw support that the transaction in case of appellant cannot be doubted and genuineness of the same cannot be disputed in terms of ratio laid down in the appellate orders of Shri Kamal Kumar Agrawal and others. In case of 8 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA Shri Kamal Kumar Agrawal the relevant extract from the orders of CIT(A) is reproduced hereunder:- Legal Position Applicability of Section 68 of the IT Act, 1961? It is further submitted that the addition made by AO under section 68 of I.T. Act, 1961 is wholly unjustified both on fact and in law. Various individual assesses and HUFs do not maintain their personal books of account. The transactions of purchase and/or sale of their shares are reflected in their bank accounts only. There are no cash credits at all and in fact no personal books are maintained, hence there cannot be any addition u/s 68 on account of alleged unexplained cash credits. There are business books of various assesses in respect of their businesses and such business books do not reflect capital investments made by them. Capital investments in shares etc. are not reflected in their business books. Bank pass books cannot be treated as books of account of the assessee and consequently entry of credits in the bank pass books cannot be treated as cash credits in the books of the assessee and section 68 has no application at all on the face of it in those cases. Reliance is placed on the decision of Bombay High Court in the case of CIT vs. Bhaichand Gandhi reported in 141 ITR 67 (1983). Even the entries of credits in pass books, on account of sale proceeds of shares, are duly explained with voluminous evidence as referred to above and the same cannot be treated as unexplained cash credits. Assessees of the group have sold the shares of companies, belonging to them through various brokers and sale proceeds are received from those persons by a/c. payee cheques or drafts from their bank accounts which have been duly confirmed by them and that they are all identifiable persons and are income- tax assesses. Not only this but on the sale proceeds so received the assessee has computed the capital gain earned by each of them, has offered the same for taxation and has paid taxes on the same. Thus the said receipts on account of sale proceeds of shares and on which appropriate capital gain tax is paid cannot by any stretch of imagination be treated as unexplained cash credit or unexplained investment or unexplained asset. 9 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 4.1 I have carefully considered appellant’s submissions. The appellant has objected to the treatment given by the AO to his LTCG as unexplained cash credit u/s 68. Written submissions in this regard have been filed on which comments of the AO were obtained. The AO submitted his comments vide letters dated 14- 03-2007 and 12-04-2007. But he has not touched upon the subject as to how section 68 is applicable in the facts and circumstances of the appellant’s case. His reply is vague. Para 4 of his letter dated 14-03-2007 is regarding the head of income under which he has taxed the LTCG in the hands of assessee. For the sake of ready reference the same is reproduced below: “4. Reg. the head under which the gain is taxable: It is adequately discussed in the asstt. orders as to why the gain arising to the assessee on sale of shares is not a Long Term Capital Gain. It may be reiterated that the `profit on sale of shares’ is, under no circumstances, taxable as Long Term Capital Gains, which enjoy a concessional rate of tax, in the light of the facts narrated in the asstt. orders.” This shows the AO. has no specific reply regarding applicability rather inapplicability of section 68 in the matter at hand. I have given a deep thought to this matter. It is an undisputed fact on record that the appellant himself in his original returns filed prior to search has shown Long Term Capital Gain on account of transactions in the same scrips which have been considered in the assessment framed u/s. 153A. Thus there was no suppression either of facts or income on the part of appellant. The sale proceeds of shares were duly declared in the original return and assessed by the Department as LTCG, the same information was given in the return filed u/s 153A. The AO has not disputed the fact that income on account of Long Term Capital Gain was duly shown by the appellant. He is rather motivated by his desire to bring the said sale proceeds under the maximum tax rate by treating it as unexplained cash credits u/s 68. I do not agree with the treatment given by the AO to said receipts. In fact, during one such hearing I clarified to the AO that in my view section 68 is not applicable in the facts of the case and he was granted time to put forth his views on the same 10 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA if he wished so. His reply dated 12-04-2007 does not deal with this aspect of the case. Thus, I infer that the AO has no comments to offer in this regard. The appellant’s AR has drawn my attention to the judgement of Hon’ble Bombay High Court in the case of CIT vs. Bhaichand H Gandhi (cited supra). I have perused the same; it is about a situation where credits appearing in bank pass book would not be included u/s 68 as the Hon’ble Court held, the passbook supplied by bank to assessee is not a book maintained by the assessee. In the case at hand it is the very sale proceed of shares, reflected in the bank account of the assessee, which was duly declared to the IT Department and income thereon was also offered to tax. Thus the assessee himself has shown the same as his income and there is no question of treating the same as unexplained cash credit u/s 68 of the Act. 4.2 Here at this juncture I would refer to judgement of Hon’ble ITAT, Nagpur Bench, Nagpur. In the case of Datta Meghe Institute of Medical Sciences, Nagpur vs. DCIT Cir-1, Nagpur, ITA No.07/Nag/2007 dated 16th March 2007. In the aforesaid judgement the Hon’ble ITAT have dealt with a direct question : Whether certain income already shown by the assessee can be assessed as unexplained cash credit u/s 68 of IT Act, 1961 under the head income from other sources. The facts of this case are quite similar to the facts in the case of hand. In the aforesaid case the assessee, a Charitable Trust, had shown certain income by way of voluntary contributions. The CIT concerned passed an order u/s 263 of the IT Act, 1961 holding that the assessee is liable to be assessed on that sum as income from other sources. The said income was determined by CIT as unexplained cash credit u/s 68. The assessee approached the Hon’ble ITAT with then plea that it had already declared that particular sum as income in the profit and loss account and provisions of section 68 are not applicable to the facts of the case. Identical situation is prevailing in the case of the present appellant. The Hon’ble ITAT on the said order of the CIT u/s 263 11 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA decided the matter in favour of the assessee by giving following finding which is squarely applicable to the present appellant’s case. “The amount which has already been declared as income in the case of assessee cannot be considered for the purpose of invocation of provisions of sec. 68 of IT Act, 1961. The provisions of sec. 68 can be invoked to sums credited by assessee which are claimed by assessee to be on account of capital, loans or such other receipts which are not chargeable to tax. The provisions of sec. 68 authorises the revenue authorities to assess any sum credited in its books of accounts as income which assessee claims to be not in the nature of income. The provisions of sec. 68 authorises the revenue authorities to assess any sum credited in its books of accounts as income which assessee claims to be not in the nature of income. The provisions of sec. 68 cannot be invoked to a receipt which is already declared by assessee as income in its return of income. In view of above we hold that the provisions of sec 68 of IT Act, 1961 are inapplicable in respect of sum of Rs.90,03,050/- credited in the books of accounts of assessee.” The Hon’ble ITAT for arriving at this decision have relied on the case of Director of Income Tax (Exemption) vs. Keshav Social & Charitable Funds reported at 278 ITR 152 of Delhi High Court. On similar facts the Delhi High Court in the aforesaid case held as under : ‘Sec. 68 of the Act has no application to the facts of the case because the assessee had in fact disclosed the donations of Rs.18,24,200/- as its income and it cannot be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee....” Now I would refer to another judgement of the Hon’ble ITAT, Nagpur in the case of M/s. Maghanmal& Co. vs. ACIT, Nagpur 12 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA (ITA No. 423/Nag/2001 dtd 9th Sept 2003). The Hon’ble ITAT therein also have dealt with the applicability or otherwise of sec. 68 : “Mere entry appearing in the balance sheet is not enough to invoke the provisions of sec 68. The provisions of section 68 apply only where any sum is found credited in the books of account of an assessee maintained for any previous year. In the case of Bhaichand N Gandhi, 141 ITR 67, the Hon’ble Bombay High Court has held that where a cash credit is found in the bank passbook, the same is not a credit appearing in the books of account maintained by the assessee and the provisions of section 68 cannot be invoked in such a case. Following the aforesaid decision of the Hon’ble Bombay High Court, this Bench in the case of Shri Rajkumar Khatri in ITA No.417/Nag/97 has held that the credit appearing in the balance sheet cannot be the basis for making an addition under section 68. From the aforesaid decision, it is clear that the addition made by invoking the provisions of section 68 was not proper.” These judgements make it amply clear that the receipts that have already been shown by the assessee as income in the books of accounts/original returns and returns filed u/s 153A also cannot be treated as unexplained cash credits u/s 68. In the circumstances of the case and in view of aforecited judgements. I hold that sec. 68 has been wrongly and unnecessarily invoked by the AO to tax the LTCG as unexplained cash credit in the hands of the appellant. Thus, I find addition u/s 68 cannot be sustained. This finding is further fortified by the fact that all the share transactions have already been held as genuine by me while discussing factual position with regard to same (supra). The addition made by the AO of Rs.52,24,000/- u/s 68, therefore, deserves to be deleted. The perusal of extract from the appellate order is reproduced hereinabove clearly explain the legal position as regard to assessment of long term capital gain u/s 68 of Income Tax Act 13 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 1961. Applying the legal position to the facts in the case of appellant addition made is unjustified. 6.6 The order passed by CIT(A) in case of Shri Kamalkumar Agrawal was challenged by revenue authority before ITAT Nagpur Bench, Nagpur and appeal was registered as ITA No.118 to 122/Nag/2007. Before Hon’ble ITAT contention was raised by revenue that SEBI had passed an order in respect to transaction of sale of shares of company in which appellant had derived long term capital gain. The Hon’ble ITAT had found no force in the submission of revenue and has recorded its finding at pages 33 to 36 which is reproduced hereunder for ready reference. The Revenue has also relied on the decisions of SEBI involving some scripts. In this regard, we are of the view that role of SEBI is different and the orders passed by them have different objectives such as orderly conduct of share markets and investor protection and, therefore, such order cannot be conclusive as regard to the genuineness of the transactions. In this regard, it would not be out of place to mention that stock market operations are subject to different regulations and the interest of general public are protected by prohibiting the market intermediaries from indulging in unfair trade practices rigging of a particular in collaborated manner. The order of the SEBI relied on by the Revenue is mainly on the aspect of pricing rigging in such manner. Hence, in our view, the same cannot be of any assistance to the cause of the Revenue. Thus, on the basis of appreciation of facts and circumstances of the case as a whole and considering the documentary evidences on record, we are of the view that the share transactions cannot be considered as ingenuine/sham and, therefore, the sale proceeds of such share transactions cannot be taxed u/s 68 of the Act. The perusal of extract of order of ITAT reproduced hereinabove squarely support the submission of appellant and thus various observations made in assessment order with regard to orders of SEBI does not deserve much credence in view of the order of ITAT Nagpur Bench, 14 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA Nagpur In case of Shri. Kamalkumar Agrawal (supra) more so, when the said decision has been upheld by Hon’ble Bombay High Court in the appeal filed by revenue authority. It is also worthwhile to state that A.O. has referred to orders of SEBI in case of M/s. Moryo Industries Ltd. The final order has been passed by SEBI on 22/08/2016 wherein listed entities which according to SEBI are indicted by said order have been listed comprising of 70 persons being various individuals and companies. The aforesaid observations are at clause 79 and page 64 - 66 of the order of SEBI. The perusal of list of entities observed in the aforesaid order does not show name of companies in which investments of shares were made by appellant nor name of appellant is appearing. Considering the totality of facts SEBI order relied upon by A.O. can have no adversity in case of appellant as it does not implicate the transaction of appellant or that of company in which investment has been made by appellant. 6.7 The order of ITAT Nagpur Bench, Nagpur in case of Shri Kamal Kumar Agrawal was challenged by revenue authorities before the Hon’ble Bombay High Court and appeal of revenue was dismissed vide judgment dated 23 rd Oct. 2009 by consolidated order in ITA No. 41/2010. The relevant extract from the judgment of Hon’ble High Court is reproduced hereunder: “5) In Income Tax Appeal No.41/2010, the respondent assessee had purchased 30,000 shares of M/s. Authentic Investments and Finance Ltd. on 8.4.1999 at the rate of Rs.0.98 per share. These shares were claimed to have been sold on 7/7/2000, 14/7/2000 and 21/7/2000 at an average value of Rs.33.81 per share. In the assessment year in question, the assessee offered to tax the capital gains arising from sale of the above shares, amounting to Rs.9,84,909/- as a long term capital gain. The same were accepted.” The sole contention raised by the revenue in these appeals is that the entire long term capital gains claimed by the assessee represent undisclosed income of the assessee because:- 15 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA (a) most of the sales of the shares effected by the Group are of the same Companies and through the same Brokers located at Calcutta. (b) Pradeep Kumar Daga, the principal Broker has confirmed that the transactions with the Haldiram Group are sham and explained the modus operandi as follows: ‘Party A wants to claim LTCG and approaches me through a person `X’. Mr. X approaches me with two names, i.e. the buyer (A) and the seller (B). Mr. A buys the share of the company held by the seller B at Rs.3/- through my terminal. After 365 days or one year when the share of the company has reached high of Rs.100/-, Mr. X approaches me through Mr. A with the name fresh purchaser Mr. C, who is willing to buy the share of Mr. A at Rs.100/-. Mr. A (who was previously the purchaser and wants to avail LTCG now) becomes the seller and sells his shares at Rs.100/- for the shares bought from Mr. A and subsequently I pay the sale proceeds in cheque/DD to Mr. A after deducting my brokerage. Subsequently Mr. A on receipt of the sale proceeds by cheques/DD pays Mr. X the same amount by cash (No.2 account), i.e. Rs.100/- and Mr. X pays the same to Mr. C. In this way, Mr. A converts the black money into white and avails Long term capital gain.” (c) The sale transactions were off market transactions and the Calcutta Stock Exchange by its letter dated 26/5/2005 has confimed that quite a few of the transactions carried out by Shri Pradeep Kumar Daga were not borne on the records of the Exchange and that the details noted on some of the other contract notes did not match. (d) There were unexplained cash credits in some of the buyer’s Bank Accounts prior to issuance of cheques to the assesses. 16 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 11) We see no merit in the above contentions. The fact that the assessee in the group have purchased and sold shares of similar Companies through the same Broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. 12) From the documents produced before us, which were also in possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assesses on the respective dates and the Company has confirmed to have handed over the shares purchased by the assesses. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assesses were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assesses. Therefore, the fact that some of the transactions were off market transactions cannot be a ground to treat the transactions as sham transactions. 13) The statement of Pradeep Kumar daga that the transactions with the Haldiram Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessee were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought to our notice that the findings recorded by the Tribunal are contrary to the documentary evidence on record. 14) The Tribunal has further recorded a finding of fact that the cash credits in the Bank Accounts of some of the buyers of shares cannot be linked to the assesses. Moreover, in the light of the 17 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA documentary evidence adduced to show that the shares purchased and sold by the assesses were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyer’s Bank Accounts cannot be attributed to the assesees. No fault can be found with the above finding recorded by the Tribunal. 15) Reliance placed by the Counsel for the revenue on the decision of the Apex Court in the case of SumatiDayal (supra) is wholly misplaced. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in reces, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the Stock Market and there was no question of introducing unaccounted money by the assessee. Thus, the decision relied upon by the Counsel for the revenue is wholly distinguishable on facts. 16) For all the aforesaid reasons, we hold that the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs. 6.8 The perusal of judgment of Hon’ble High Court and in particular para 5 of the judgment indicates that facts noted in the aforesaid case were that shares purchased were sold within short period 13 to 14 months and long term capital gain derived was almost 34 times of investment made. The Hon’ble Court has also taken note of statement of broker as to modus operandi explained by him before Investigation Wing of Dept. The Hon’ble High Court went on to record that if the shares are sold at prevailing market rate at stock exchange which is properly supported by contract note the genuineness of transaction cannot be disputed. In case of appellant in fact there is no adverse evidence brought on record so as to disbelieve the transaction of sale of shares. The facts in case of appellant 18 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA are on a better pedestal as compared to facts as have been noted by the Hon’ble Bombay High Court while holding that the transaction of sale of shares is genuine. The ratio laid down by Hon’ble Bombay High Court squarely applies to facts in case of appellant and the addition made by A.O. is unjustified and unsustainable. It is worthwhile to mention that SLP filed by revenue against the order of Hon’ble Bombay High Court has been dismissed vide judgement of Apex Court dated 08/08/2011 in Civil Appeal No.CC12497/2011. 6.9 The Hon’ble Bombay High Court in Income Tax Appeal No. 456/2207 in case of CIT Vs. Shri Mukesh RatilalMordia in its judgment dated 07/09/2011 had considered the case of assessment of long term capital gain on sale of shares of four companies. The facts as seen from the order of ITAT would show that the addition made in the said case was considering the modus operandi similar to as discussed in assessment order of appellant. In the aforesaid case A.O. had come to conclusion that the shares sold by appellant are bogus transaction. The Hon’ble ITAT had concluded that the transaction in respect to sale of shares is supported by legal evidence and cannot be rejected on inferences. The ratio laid down by Hon’ble Bombay High Court squarely applies to the facts in case of appellant. Considering the ratio laid down by Hon’ble Bombay High Court addition made by AO in case of appellant is unjustified and unsustainable. 6.10 The various decisions of ITAT as given hereunder have held that transaction of sale of shares cannot be disputed or doubted on mere inferences. i)) Order ITA No.1442/Ahd/2013 dated 06/01/2017 in the case of Shri Vineet Sureshchandra Agrawal. ii) Order ITA No.4861/Mum/2014 dated 27/05/2016 in the case of Shri Indravandan Jain (HUF), Goregaon, Mumbai. iii) Order ITA No.3801/Mum/2011 dated 27/04/2016 in the case of M/s. Farrah Marker, Mumbai. iv) Order ITA No.6106 & 6107/Mum/2012 dated 18/12/2015 in the case of M/s. Jogia Properties. 19 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA v) Order ITA No.19/Kol/2014 dated 02/12/2016 in the case of Shri Dolarai Hemani. vi) ITAT order in ITA No.1773/Mum/2010 in the case of Mrs. Rasila N. Gada vide order dated 08/08/2012. vii) ITAT order in ITA No.6494/Mum/2014 in the case of Shri Sunil Prakash vide order dated 08/03/2017. In particular, the following judgments of various courts have held the following :  Mr. JatinChhadwa v. ACIT (ITA No 8573/Mum/2010) (Mumbai Tribunal) wherein it has been held as under: "9. We have considered the submissions of the Counsels from both the sides. We find that the AO is carried away in his presumptions and surmises in respect of penny stock. disregarding the direct evidences filed by the assessee in the form of Contract Notes, brokers’ confirmation and PA No. Without making any enquiry on his part, the AO simply formed a belief that since some irregular practices have happened in the stock market, the windfall gain made by the assessee is a result of such malpractices. We find that the Ld. CIT(A) has also been carried away with such news items without realizing that his powers are co-terminus to that of the AO and if the AO has failed to make certain enquiries, the Ld. CIT(A) could have done so on his own. The Revenue cannot convert good evidences into bad evidences on surmises and conjectures just because certain brokers formed a cartel and manipulated prices of certain stocks and if the assessee is one of the beneficiaries, then solely on the basis of this, it cannot be said that the assessee has entered into some sham transaction. We have no hesitation to say that the findings of the lower authorities are totally based on presumptions and surmises, without any enquiry. After considering direct evidences brought on record by the assessee and the findings of the Hon’ble Jharkhand High Court (supra), we have no 20 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA hesitation to hold that the transaction has resulted into Long Term Capital gains as shown by the assessee. We therefore direct the AO to accept the gains as Long Term Capital Gains."  Sri DolarraiHemani v. ITO (ITA 19/Kol/2014) (Kolkata Tribunal) wherein it has been held as under: "2.9.5.We find that the similar issue had been adjudicated by the co- ordinate bench of this tribunal in the case of DCIT vs Sunita Khemka in ITA Nos. 714 to 718/Kol/2011 dated 28.10.2015 and in the case of ITO vs Rajkumar Agarwal in ITA No. 1330 (Kol) of 2007 dated 10.8.2007 wherein it was held that when purchase and sale of shares were supported by proper contract notes , deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognized broker and the sale considerations were received by account payee cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. We find that in the instant case, the addition has been made only on the basis of the suspicion that the difference in purchase and sale price of these shares is unusually high. The revenue had not brought any material on record to support its finding that there has been collusion / connivance between the broker and the assessee for the introduction of its unaccounted money. 2.9.6. In view of the aforesaid facts and findings and the judicial precedents relied upon, we have no hesitation in directing the ld AO to accept the claim of exemption of LTCG of the assessee arising out of sale of shares of G.K.Consultants Ltd and accordingly allow the ground raised by the assessee in this regard."  ITO v. M/s Indravan Jain HUF (ITA No 4861/Mum/2014) (Mumbai Tribunal) wherein it has been held as under: "8. We have considered rival contentions and carefully gone through the orders of authorities below and found from the record that the AO 21 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA has treated the share transaction as bogus on the plea that SEBI has initiated investigation in respect of RamkrishnaFincap Pvt. Ltd. The AO further stated that investigation revealed that transaction through M/s Basant Periwal and Co. on the floor of stock exchange was more than 83%. We found that as far as initiation of investigation of broker is concerned, the assessee is no way concerned with the activity of the broker. Detailed finding has been recorded by CIT(A) to the effect that assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same. We found that M/s Basant Periwal and Co. never stated any of the authority that transaction in M/s RamkrishnaFincap Pvt. Ltd. on the floor of the stock exchange are ingenuine or mere accommodation entries. The CIT(A) after relying on the various decision of the coordinate bench, wherein on similar facts and circumstances, issue was decided in favour of the assessee, came to the conclusion that transaction entered by the assessee was genuine. Detailed finding recorded by CIT(A) at para 3 to 5 has not been controverted by the department by brining any positive material on record. Accordingly, we do not find any reason to interfere in the findings of CIT(A). Moreover, issue is also covered by the decision of jurisdictional High Court in the case of Shyam R. Pawar (supra), wherein under similar facts and circumstances, transactions in shares were held to be genuine and addition made by AO was deleted. Respectfully following the same vis-à-vis findings recorded by CIT(A) which are as per material on record, we do not find any reason to interfere in the order of CIT(A)." 22 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA  CIT v. Shri Mukesh RatilalMarolia (6 SOT 247) (Mumbai ITAT) upheld in (ITA 456 of 2007) (Bombay High Court) wherein it has been held as under: "10.3 Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off- market transactions." The perusal of facts of judgment of ITAT referred to hereinabove shows that there are similar to the facts as in the case of appellant. The ratio laid down fully support the case of appellant and transaction in respect to sale of shares cannot be disbelieved on mere suspicious without there being any adverse evidence on record. The ratio laid down by the decision referred to hereinabove applies with full force to the facts in case of appellant. Respectfully following the same I hold that the transaction of appellant in respect to sale of shares cannot be doubted / disputed. 6.11 The submission made by appellant are reproduced at para 5 and it addresses various technical observations made by A.O. in the assessment order which are mere inferences. There is no credible evidence on record to conclude that transaction of sale of shares by the appellant is not genuine. The various decision relied upon by A.O. are distinguishable on facts and are inapplicable to the facts in case of appellant. On the contrary decision of Hon’ble Bombay High Court being of jurisdictional High Court clearly support and applies with full force to the facts in case appellant. 6.12 Respectfully following the decision of Hon’ble Bombay High Court and the decisions of various Income Tax Appellate Tribunal discussed hereinabove I hold that the transaction of sale of shares by appellant cannot be doubted / disputed. The addition made by A.O. is thus 23 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA unjustified and unsustainable. Every transaction and income has to be brought to tax on basis of material on records, facts of the case, legal position and judicial pronouncements. Based on these yardstics the A.O. has not brought any evidence on record to justify addition in view of judicial precedence relied upon by the appellant. Considering the totality of facts and circumstances in case of appellant I hold that the addition made by A.O. is unjustified and is directed to be deleted. Ground of appeal is allowed.’’ 9. The learned DR referred to various facts observed in assessment order to submit that sale proceeds of shares is liable to be assessed as unexplained cash credit u/s 68 of I.T. Act 1961. The learned DR placed strong reliance on the order of the A.O. to submit that relief granted by CIT(A) is not proper and order passed by A.O. be restored. 10. The Counsel of assessee before us has made submission which is reproduced hereunder: A) The assessee had acquired 2,00,000 shares of M/s. Out of City Travel Solutions Ltd. in preferential allotment at premium of Rs.22/- per share with lock in period of one year (P. 1). Investment of 2,00,000 shares at Rs.46,00,000/- made in Asstt. Year 2013-14 shown in Balance Sheet (P. 3). Regular assessment for Asstt. Year 2013-14 is made u/s 143(3) of Income Tax Act 1961. Purchase of shares stood accepted and has achieved finality (P. 4 & 5). i) Letter of allotment dated 20/10/2012 (P- 1) [Vol.-III] ii) Financial Statement (P- 3) [Vol.-III] 24 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA iii) Regular assessment order (P- 4 – 5) [Vol.-III] B) Assessee during period from December 2013 to January 2014 has sold shares of M/s. Out of City Travel Solutions Ltd. at Bombay Stock Exchange on screen based trading conducted through registered brokers at quoted rates. It is evident from contract note that STT is paid. Brokerage is charged. Service tax on brokerage is also charged. Transaction of assessee has been subjected to statutory levies. Time of trade and market rate is indicted. (Contract Notes Page12 to 35) [Vol.-III] C) The details of documents on record to corroborate the transactions are as under:- i) Demat Account ii) Contract Notes iii) Allotment of Shares iv) Ledger A/c of assessee in the books of Broker. v) Bank Statement of assessee D) Purchase/sale of shares through proper banking channel. Legal and credible evidence submitted not found to be incorrect or false. Addition sought to be made only on adverse inferences and assumption. No shred of evidence brought on record to discredit legal transaction. Apparent is real is settled position of law. E) Acquisition of shares is not disputed by A.O. It is not the case of A.O. that the shares acquired by assessee has not been sold or are held by assessee at the time of framing of assessment. The shares have been sold at the ruling market rate is also undisputed fact on record. On aforesaid factual position there is no case for A.O. to hold 25 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA that the sale proceed of shares is unexplained credit so as to make addition for the same at the hands of assessee. F) Addition made by A.O. is by making observation about financial analysis of company and general information in stock market. None of documentary legal evidence placed on record has been found to be false or incorrect. No shred of evidence is brought on record to discredit transaction of sale of shares of assessee. Thus addition made is not on the basis of any evidence on record indicting transaction of shares of assessee and is unjustified. G) Quoted market rate has statutory recognition under sec. 56 of I.T. Act 1961 for charging tax at the time of acquisition of shares. Section 55(2)(ac) provides quoted rate of shares as cost of acquisition as on 31/01/2018 in certain cases to determine capital gain. H) Recent decision dated 15/01/2021 of Hon’ble Delhi High Court in the case of Smt. Krishna Devi in ITA No.125/2020 fully supports the case of assessee. (P- 1 to 10) (7, 8, 9, 10) I) i) The assessee invites attention to the case of Shri Kamal Kishore Agarwal and family members wherein Revenue Authorities had concluded that sale proceeds of shares are liable to be assessed u/s 68 of Income Tax Act 1961 and is bogus transaction. ii) The appeal of Shri Kamal Kishore Agarwal was disposed by order dated 17/04/2007 in Appeal No.CIT(A)-1/1022/2006-07. The Hon’ble CIT(A) after extensively examining the facts and legal 26 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA position in the said case has accepted the claim of assessee that the transaction was genuine and directed to delete the addition made by A.O. u/s 68 of Income Tax Act 1961. iii) The aforesaid departmental appeal was disposed by order dated 24 th July 2009 wherein various contention raised by revenue were rejected and appeal of revenue was dismissed. The Hon’ble ITAT had also taken note of decision of SEBI in the case of Share Brokers and its effect on share transaction. iv) Order passed by Hon’ble ITAT Nagpur Bench, Nagpur was challenged by revenue authorities before the Hon’ble Bombay High Court by filing an appeal u/s 260A of ITAT. The aforesaid appeals filed before Hon’ble Bombay High Court were decided by Hon’ble High Court vide judgment dated 23/09/2010 in consolidated order in Income Tax Appeal No.41/2010. v) The Hon’ble High Court had also noted the contention of revenue that the broker had deposed that transaction before the Income Tax Department with Haldiram were bogus and modus operandi of the transaction was explained. The Hon’ble High Court after considering the submission as made before it has concluded that there is no merit in appeal of revenue and thus appeal filed by revenue was dismissed. vi) The aforesaid order of Hon’ble Bombay High Court was further challenged by revenue authorities before Hon’ble Apex Court by filing SLP. The aforesaid special leave petition came to be disposed of by an order dated 08/08/2011. 27 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA vii) The findings as recorded at Para 11 to 16 of Judgment of Hon’ble Bombay High Court in the case of Shri Kamal Kishore Agrawal are relied upon and ratio laid down in the said Judgment squarely applies to the facts in case of assessee. The facts in the case of assessee are on better pedestal than as where under consideration before Hon’ble High Court in the aforesaid case. (P- 20 – 23) (21, 22) [Vol.-I] H) The Hon’ble Bombay High Court in Income Tax Appeal No. 456/2207 in case of CIT Vs. Shri Mukesh RatilalMordia in its judgment dated 07/09/2011 had considered the case of assessment of long term capital gain on sale of shares of four companies. The addition made in the said case was considering the modus operandi similar to as discussed in assessment order of assessee. (P- 130 – 133) (131 & 132) [Vol.-I] The ratio laid down by Hon’ble Bombay High Court squarely applies to the facts in case of assessee. I) Investigation made by the Directorate of Investigation, Kolkata is mere description of modus operandi in respect to Penny Stock. J) Reliance on decision of ITAT, Mumbai Bench in ITA No.6519/Mum/2019 in the case of Smt. Kalpana Mukesh Ruia vide order dated 31/12/2020. (P- 11 to 47) (39, 40, 41, 42, 43) [Vol.-II] K) The provisions of section 68 of Income Tax Act 1961 are applicable in respect to item of credit in the books of account which assessee 28 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA claimed to be in nature of liability and not income. Receipt of sale price of capital assets is shown as income liable to be assessed under head capital gain and is not shown as liability. Provisions of section 68 are inapplicable. Reliance on: Hon’ble ITAT, Nagpur Bench, Nagpur in case of Datta Meghe Institute of Medical Sciences in ITA No.07/Nag/2007 vide order dated 16/03/2007. (P- 1 to 17) (12) [Vol.-I] L) No observation is made in respect to transaction of assessee or is relating to company in which investment has been made by assessee. The information as may be available with A.O. has neither been confronted nor made available to assessee to have his say on the same. Such information is liable to be excluded for framing assessment considering the principle of natural justice. Reliance on: i) Hon’ble Supreme Court order in Civil Appeal No.4228 of 2016 in the case of M/s. Andaman Timber Industries vide order dated 02/09/2015. M) The various decision as discussed in assessment order are not in relation to transaction of shares. Thus ratio laid down in the said decision is inapplicable to the facts in case of assessee. N) More so, when the entire transaction of assessee is backed by corroborative evidence and is through proper banking channel. 29 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 11. We have considered the submission made by both the parties and perused the materials available on record. The Assessee in return of income had declared long term capital gain arising out of sale of shares of company M/s. Out of City Travel Solutions Ltd. The shares of aforesaid company are listed at Bombay Stock Exchange and were being regularly traded. The assessee had purchased 2 lacs shares of said company in preferential allotment during Asstt. Year 2013-14. Shares are received in Demat account and allotment letter of shares indicating lock in period of one year is placed on record. The investment in purchase of shares was duly recorded in books of account as investment in shares. In regular assessment framed u/s 143(3) for Asstt. Year 2013-14 investment made in purchase of shares has been accepted. Purchase of shares and its ownership is not disputed by A.O. It is not alleged that shares are held by assessee and are not sold. Shares are sold during the year and same is evident from Demat Account of assessee on record. 12. The A.O. in assessment order by referring to investigation by Directorate of Investigation, Kolkata and statement of assessee recorded in the course of appellate proceedings, low profitability of company and by referring to orders passed by SEBI in case of M/s. Moryo Industries Ltd. has concluded that long term capital gain booked by assessee is pre arranged method to evade tax and laundering of money. A.O. has thus finally concluded that sale proceeds of 30 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA shares is liable to be assessed as unexplained cash credit u/s 68 of Income Tax Act 1961. A.O. accordingly has made addition of Rs.5,73,42,518/- being sale proceeds of shares as income u/s 68 of I.T. Act 1961. 13. The shares held by assessee in Asstt. Year 2013-14 have been sold in open market on screen based trading at BSE during the period from Dec. 2013 to Jan. 2014. The details of sale have been reproduced in assessment order at pages 12 to 14. The details as reproduced in assessment order indicate the time of trade as well as market rate at which the aforesaid transaction has been completed. The aforesaid transaction in respect to sale of shares is corroborated by contract notes of the registered broker which are placed on record and also before us in the appellate proceedings. The genuineness of contract notes is beyond doubt. The perusal of contract note indicates that security transaction tax has been paid on the transaction in respect to sale of shares by assessee. In the course of assessment proceedings ledger account of assessee with registered broker wherein sale proceeds of shares were being credited and remittance out of same to the account of assessee through proper banking channel was reflected. The genuineness of account of assessee with registered broker is also beyond doubt. A.O. scanned and pasted graph to indicate activity of shares trading in respect to company in which assessee has made investment. The aforesaid graph pasted in assessment order is at page 8 and demonstrates that 31 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA shares are being regularly traded at BSE. Onus to explain the transaction of sale of shares has been satisfactorily discharged on which long term capital gain has been declared in return. Perusal of assessment order does not show that there is any material or evidence on record to impeach the genuineness of transaction of sale of shares by assessee. A.O. has merely drawn adverse inference by observing modus operandi and making general observations. The A.O. has not brought any specific credible evidence on record which discredits the share transaction of assessee. Before us learned DR has not pointed out any evidence on record which discredits the transaction of shares of assessee. All documentary evidence placed on record clearly demonstrate genuineness of transaction of shares of assessee. 15. The Addition made by A.O. is by making observation about financial analysis of company and general information in stock market. None of documentary legal evidence placed on record by assessee substantiating sale of shares has been found to be false or incorrect. No shred of evidence is brought on record to discredit transaction of sale of shares of assessee. Thus addition made is unjustified. 32 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA 16. Recent decision dated 15/01/2021 of Hon’ble Delhi High Court in the case of Smt. Krishna Devi in ITA No.125/2020 fully supports the case of assessee. Relevant extract from the judgement is reproduced hereunder. “10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. 33 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO 34 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.” Ratio laid down fully supports the case of assessee. A.O. has not brought any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG as alleged. In the absence of any such material that could support the case put forth by the A.O., addition made is unjustified. Ratio laid down by Hon’ble High Court squarely applies to the facts in the case of assessee respectfully following same we hold that addition made by A.O. is unjustified and unsustainable. 16. The Hon’ble Jurisdictional high court in case of Kamal Kishore Agrawal in ITA No 67 of 2010 fully supports the case of assessee. Relevant extract of judgement is reproduced hereunder : 11) We see no merit in the above contentions. The fact that the assessees in the group have purchasedand sold shares of similar Companies through the 35 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA same Broker cannot be a ground to hold that thetransactions are sham and bogus, especially whendocumentary evidence was produced to establish the genuineness of the claim. 12) From the documents produced before us,which were also in possession of the Assessing Officer,it is seen that the shares in question were in fact purchased by the assessees on the respective datesand the Company has confirmed to have handed overthe shares purchased by the assessees. Similarly, thesale of the shares to the respective buyers is alsoestablished by producing documentary evidence. It istrue that some of the transactions were off-markettransactions. However, the purchase and sale price ofthe shares declared by the assessees were inconformity with the market rates prevailing on therespective dates as is seen from the documents furnished by the assessees. Therefore, the fact thatsome of the transactions were off market transactionscannot be a ground to treat the transactions as sham transactions. 13) The statement of Pradeep Kumar Daga that the transactions with the Haldiram Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the sharessold by the assesses were in consonance with themarket price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of factthat the transactions were genuine. Nothing is broughtto our notice that the findings recorded by the Tribunalare contrary to the documentary evidence on record. 14) The Tribunal has further recorded a finding offact that the cash credits in the Bank Accounts of someof the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentaryevidence adduced to show that the shares purchasedand sold by the assessees were in conformity with themarket price, the Tribunal recorded a finding of factthat the cash credits in the buyers' Bank Accountscannot be attributed to the assessees. No fault can befound with the above finding recorded by the Tribunal. 15) Reliance placed by the Counsel for the revenue on the decision of the Apex Court in the caseof SumatiDayal (supra) is wholly misplaced. In thatcase, the assessee therein had claimed income fromhorse races and thefinding of fact recorded was thatthe assessee therein had not participated in races, butpurchased winning tickets after the race with theunaccounted money. In the present case, thedocumentary evidence clearly shows that the 36 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA transactions were at the rate prevailing in the StockMarket and there was no question of introducingunaccounted money by the assessees. Thus, the decision relied upon by the Counsel for the revenue iswholly distinguishableon facts 16) For all the aforesaid reasons, we hold that thedecision of the Tribunal is based on finding of facts. Nosubstantial question of law arises from the order of theTribunal. Accordingly, all these appeals are dismissed.No order as to costs The ratio laid down in said judgement squarely applies to facts in case of assessee. Respectfully following judgement of Hon’ble Jurisdictional High Court addition made by A.O. is held to be unjustified and unsustainable. 17. The various decisions of Apex Courts, High Courts and ITAT as given in submission of assessee recorded in appellate order have held that transaction of sale of shares cannot be disputed or doubted on mere inferences. Respectfully following the same addition made by A.O. is held to be unjustified and unsustainable. 18. The learned CIT(A) has dealt with the facts and evidence on record extensively while granting relief in the case of assessee. Detailed order passed by the CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We note that various adverse inferences drawn by A.O. in assessment order have been correctly dealt with in his appellate order and does not call for any interference. We are in agreement with the findings 37 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA and reasoning recorded by CIT(A) in his appellate order reproduced hereinabove deleting the addition in the case of assessee. 19. Considering totality of facts and circumstances in the case of assessee and considering legal evidence on record. We hold that that addition made by A.O. is unjustified and unsustainable. We uphold the order of CIT(A) deleting addition made in the assessment framed. Grounds of appeal 1 to 5 of revenue are dismissed. 20. Ground 6 of appeal of revenue relates to challenging the order of ld. CIT (A) allowing the relief in case of assessee by deleting the addition made by A.O u/s 69C on account of unexplained expenditure. The assessee has made detailed written submission before ld. CIT(A). In appellate order ld. CIT (A) has deleted the addition made by A.O The ld. CIT(A) in his appellate order held as under: “9. I have considered the submission made by counsel of appellant and perused the evidence on record, In case of appellant addition has been made u/s 69C of Income Tax Act 1961 at Rs.28,67,126/- as alleged expenditure on account of commission paid for bringing back money in his books as bogus long term capital gain. A.O. has computed the aforesaid sum as being 5% of sale proceeds of shares reflected in books of account. In Ground No.1 to 3 I have discussed the issue as regard to long term capital gain on sale of shares and have concluded that the transaction in 38 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA respect to sale of shares by the appellant is genuine and cannot be doubted. The A.O. bad made addition as according to him the transaction of sale of share was bogus. The very premises for which the addition is made has been held to be not correct and thus consequent addition made by A.O. for alleged expenditure is unjustified and unsustainable. It is seen that the A.O. has made adverse inference which is not based on any material or evidence on record. A.O. has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require to be explained by appellant. It is settled position of law the onus is on A.O. to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no evidence of expenditure incurred by appellant, the question of any addition for the same does not survive. The addition made by A.O. is unjustified and unsustainable. I therefore hold that there is no case for making any addition u/s 69C of Income Tax Act 1961 at the hands of assessee and addition made by A.O. at Rs.28,67,126/- is directed to be deleted. 21. The learned DR placed reliance on the order of the A.O. to submit that relief granted by ld. CIT(A) in respect to addition made u/s 69C on account of unexplained expenditure is not proper and order passed by A.O. be restored. 22. The counsel of assessee before us has made submission which is reproduced hereunder: A) Reliance on detailed submission on Gr. No.1 to 5 that genuine/bonafide transaction is in respect to long term capital gain.. 39 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA B) No evidence brought on record as to incurring of expenditure for which addition could be made u/s 69C of I.T. Act 1961. C) Addition on inference/assumption cannot be made u/s 69C in the absence of requisite conditions as per provision of sec. 69C of I.T. Act 1961. D) CIT(A) has correctly deleted the addition for detailed reasons given in appellate order. 23. In case of assessee addition has been made u/s 69C of Income Tax Act 1961 at Rs.28,67,126/- as alleged expenditure on account of commission paid for bringing back money in his books as bogus long term capital gain. A.O. has computed the aforesaid sum as being 5% of sale proceeds of shares reflected in books of account. The A.O. has made addition as according to him the transaction of sale of share was bogus. The very premise for which the addition is made has been held to be not correct and thus consequent addition made by A.O. for alleged expenditure is unjustified and unsustainable. It is seen that the A.O. has made adverse inference which is not based on any material or evidence on record. A.O. has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require to be explained by assessee. It is settled position of law the onus is on A.O. to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no 40 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA evidence of expenditure incurred by assessee, the question of any addition for the same does not survive. The addition made by A.O. is unjustified and unsustainable. We therefore hold that there is no case for making any addition u/s 69C of Income Tax Act 1961 at the hands of assessee. Addition made by A.O. at Rs.28,67,126/- has correctly been deleted by learned CIT(A) . We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. We find no merit in the appeal of revenue and ground no 6 of appeal of revenue is dismissed. 24. Ground No.7 and 8 of appeal of revenue relates to challenging the order of CIT (A) treating sale of land as capital gain instead of business income The assessee has made written submission before ld. CIT(A). In appellate order ld. CIT(A) has held that surplus arising on sale of land is capital gain and not business income . The relevant extract of order is reproduced hereunder . 12. I have considered the submission made by appellant and find substantial force in the same. The assessee has sold properties and surplus arising on the same has been declared as long term capital gain at the hands of appellant. The computation of income indicates that the surplus shown in the return is under the head long term capital gain. The properties sold by appellant are held for more than 36 months is undisputed fact on record. The investment made by appellant is recorded in books of account as investment being capital assets. A.O. has referred to statement of appellant as reproduced in assessment order at page 20 to conclude that the appellant has admitted that he is carrying on business in real estate. The appellant was questioned in the statement as to what is the source of your livelihood. It is in respect to this question it was 41 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA submitted that he is dealing in timber business and also deals in property and shares business. In answer to question No.5 appellant has clearly stated that “I am investor only”. The statement read as a whole does not indicate that the appellant has admitted as observed by A.O. in assessment order i.e. he is engaged in the activity of business in property. The adverse inference drawn by A.O. in respect to assessment proceedings is unjustified. In case of appellant the property having been held for more than 36 months as investment indicates that the intention of acquisition of property was to hold the same as capital assets and thus surplus arising on the same correctly declared to be assessable under the head long term capital gain. I therefore hold that no fault can be found with regard to income declared under the head long term capital gain on sale of property. A.O. is directed to accept the long term capital gain as shown in return of income and addition made in the assessment framed on account of business income is directed to be deleted. The ground of appeal is disposed of as per direction given hereinabove.” 25. The learned DR placed reliance on the order of the A.O. to submit that relief granted by CIT(A) is not proper and order passed by A.O. be restored. 26 The counsel of assessee before us has made submission which is reproduced hereunder: A) Long Term Capital Gain on sale of land shown at Rs.39,72,484/- on sale of two parcels of agricultural land at Kaspi and Kanhalgaon. B) Kspi agricultural land acquired on 21/11/2003 and sold on 20/04/2013 has holding period of 9 ½ years (Approximate). It is co-owned property by 2 co-owners. C) Kanhalgaon land acquired on 27/03/2008 and sold on 24/01/2014 has holding period of 6 years (Approximate). It is co-owned property by 6 co-owners. 42 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA D) Co-owned property is indicative of fact that it is capital asset and not trading activity. It is not disputed that it is co-owned property. E) In books it is shown as investment. Agricultural income derived was declared as agricultural income. It was not acquired with intention to trade. Period of holding substantiate the submission made. F) Onus is on revenue to show that gain is in the nature of adventure in trade. Reliance on: i) (1988) 38 Taxman 102 (Bom) CIT vs. V.A. Trivedi (P- 48 – 58) (50 – 53) [Vol.-II] ii) ITAT order in ITA No.544/Pun/2018 in the case of M/s. Adrus Estate and Properties LLP vide order dated 05/07/2021. (P- 59 – 70) (65, 67, 68) [Vol.-II] iii) CBDT Circular No.6/2016 dated 29/02/2016. (P- 71 – 72) [Vol.-II] 27. We have considered the submission made by both the parties .The assessee has sold properties and surplus arising on the same has been declared as long term capital gain at the hands of assessee. The computation of income indicates that the surplus shown in the return is under the head long term capital gain. The properties sold by assessee are held for more than 36 months is undisputed fact on record. The investment made by assessee is recorded in books of account as investment being capital assets. A.O. has referred to statement of assessee as reproduced in assessment order at page 20 to conclude 43 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA that the assessee has admitted that he is carrying on business in real estate. The assessee was questioned in the statement as to what is the source of your livelihood. It is in respect to this question it was submitted that he is dealing in timber business and also deals in property and shares business. In answer to question No.5 assessee has clearly stated that “I am investor only”. The statement read as a whole does not indicate that the assessee has admitted as observed by A.O. in assessment order i.e. he is engaged in the activity of business in property. The adverse inference drawn by A.O. in assessment proceedings is unjustified. It is noted that one of the property sold was owned and held for around 9½ years and another property sold was owned and held for 6 years. Property owned and held was enjoyed for deriving agricultural income which is accepted in the case of assessee. Both the properties are held as co-owner. On above factual position it cannot be concluded that surplus arising is business income as held by A.O. In case of assessee property having been held for more than 36 months as investment indicates that the intention of acquisition of property was to hold the same as capital assets and thus surplus arising on the same is correctly declared to be assessable under the head long term capital gain. We therefore hold that no fault can be found with regard to income declared under the head long term capital gain on sale of property. CIT(A) has correctly directed to accept long term capital gain and not assess 44 ITA No.204/NAG/2017 ACIT, CIRCLE-4, NAGPUR VS SHRI VINOD BALBHADRA GOENKA income as business income. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of assessee. We find no merit in appeal of revenue. Grounds of appeal of Revenue 7 and 8 are dismissed. 28. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 28/06/2022 Sd/- Sd/- Sd/- (ARUN KHODPIA) ACCOUNTANT MEMBER Sd/- (SANDEEP GOSAIN) JUDICIAL MEMBER Nagpur DATED: 28 /06 /2022 *Mishra Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. By Order Assistant Registrar ITAT, Nagpur