Sanjay Kumar Agarwal (HUF), Howrah V. ITO, Ward - 48(4) , Kolkata

ITA 2378/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6147 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-07-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 16-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER
• Keywords: Earning of tax free income; Bogus
• Section: 68; 201; 13

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NOS. 2378/KOL/2018 ASSESSMENT YEARS: 2015-16 SANJAY KUMAR AGARWAL (HUF) RITZ COURT, FLAT NO. 317, 3 RD FLOOR, SAPUIPARA(EAST), BALLY, HOWRAH-711227 VS. INCOME-TAX OFFICER WARD-48(4), KOLKATA (PAN: AASHS5458J) APPELLANT RESPONDENT FOR THE APPELLANT SHRI SUNIL SURANA, FCA FOR THE RESPONDENT SHRI SANKAR HALDER, JCIT, SR. D R DATE OF HEARING 02.07.2019 DATE OF PRONOUNCEMENT 07.08.2019 ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-14, KOLKATA DATED 05.10.2018 FOR ASSESSMENT YEAR 2015-1 6. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS AGAINST TH E ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 15,95,720/- CLAIMED BY THE ASSE SSEE AS LONG TERM CAPITAL GAIN (HEREINAFTER LTCG) ON SALE OF SHARES OF M/S. SULA BH ENGINEERING AND SERVICES LTD. (HEREINAFTER M/S. SESL) UNDER SECTION 68 OF THE I NCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 3. BRIEF FACTS OF THE CASE AS NOTED BY THE AO IS TH AT HE GOT INFORMATION FROM THE INVESTIGATION WING THAT THE ASSESSEE HAD INDULGED I N BOGUS LTCG FROM THE TRANSACTION OF PURCHASE AND SALE OF SHARES OF M/S. SESL. SO HE ASK ED THE ASSESSEE TO FURNISH THE DETAILS FOR WHICH HE HAS ASKED TWENTY QUERIES WHICH HAVE BEEN R EPRODUCED AT PAGE 2 OF THE ASSESSMENT ORDER. THE AO ACKNOWLEDGES THAT THE KARTHA OF THE A SSESSEE (HUF) APPEARED BEFORE HIM AND FILED THE DOCUMENTS FROM WHICH IT TRANSPIRED TH AT THE ASSESSEE HAD PURCHASED 800 SHARES OF M/S. SESL AT THE RATE OF RS. 42.67 FOR A TOTAL A MOUNT OF RS. 3,41,338/-. THIS PURCHASE 2 ITA NO. 2378/KOL/2018 SANJAY KUMAR AGARWAL (HUF), AY: 2015-16 WAS MADE THROUGH M/S. JM FINANCIAL SERVICES PVT. LT D. (BROKER BSE AND NSE, SEBI REGISTERED NO. INB011054831) AND SOLD ALSO THE SAME SHARES THROUGH THE SAME BROKER WHICH BELONGED TO KOLKATA. ACCORDING TO THE AO, THE ASSES SEE HAD EXPLAINED TO HIM THAT THE PURCHASE OF THIS SHARE WAS ON THE BASIS OF THE MARK ET INFORMATION AND THAT THOUGH THE SHARES WERE INITIALLY RECEIVED IN PAPER FORMAT, ONCE THE C OMPANY GOT THE CERTIFICATE FOR DEMATERIALIZATION OF THE SHARES, THE SHARES HAVE BE EN DEMATERIALIZED. THEREAFTER THE AO NOTES THAT ASSESSEE PURCHASED THE SHARES ON 05.02.2 013 AT THE RATE OF 42.67 PER SHARE FOR A TOTAL PAYMENT OF RS. 3,41,340/- IN AN OFF MARKET TR ANSACTION. LATER, THE ASSESSEE SOLD THE SHARES ON 18.06.2014, 4000 SHARES AT RS. 246.05 PER SHARE AND RECEIVED RS. 4,36,646/- AND ANOTHER LOT OF 4000 SHARES ON 22.08.2014 AT THE RAT E OF RS. 240.48 PER SHARE THEREBY RECEIVING TOTAL AMOUNT OF RS. 7,91,241/-. THEREAFTE R THE AO NOTES THAT THE ASSESSEE HAVING PURCHASED THE SHARES AT THE RATE OF 42.67 PER SHARE IN JANUARY, 2013 HAD SOLD THE SAME AT THE RATE OF 246.05 PER SHARE IN JUNE, 2014 MEANING THER EBY THAT THE ASSESSEE GOT 203 TIMES OF HIS PURCHASE VALUE WITHIN A VERY SHORT PERIOD OF TIME W HICH IS UNUSUAL AND UNBELIEVABLE. THEREAFTER, THE AO REPRODUCED CHARTS SHOWING THE GR APHIC DESCRIPTION ABOUT THE PRICE RISE OF THIS SHARE AND THEREAFTER, HE REPRODUCES THE FINANC IALS OF THE COMPANY AND WAS OF THE OPINION THAT THE ASTRONOMICAL INCREASE IN PRICE AFT ER JANUARY, 2013 IS BEYOND THE HUMAN PROBABILITIES AND IS A COLOURABLE DEVICE TO CONVERT THE UNACCOUNTED MONEY INTO TAX EXEMPT INCOME. THEREAFTER THE AO DESCRIBES THE GENERAL MOD US OPERANDI ADOPTED BY UNSCRUPULOUS BROKERS AND CERTAIN PENNY STOCK COMPANIES AND THERE AFTER, HE FINDS FAULT WITH THE ASSESSEE PURCHASING SHARES IN AN OFF MARKET TRANSACTION WHIC H ACCORDING TO THE AO WAS A TRANSACTION CARRIED OUT IN A PRE-PLANNED MANNER TO LAUNDER THE BLACK MONEY AND TAKING NOTE OF CERTAIN DOUBTS HE EXPRESSED IN RESPECT TO THE TRANSACTIONS IN QUESTION WAS OF THE OPINION THAT THE ASSESSEES CLAIM OF LTCG IS NOT REAL; AND HE HELD I T AS BOGUS AND BY APPLYING THE TEST OF HUMAN PROBABILITIES HE TREATED THE ENTIRE RECEIPT O F RS. 15,95,713/- AS A FABRICATED TRANSACTION AND THE SAME WAS TREATED AS BOGUS AND A DDED UNDER SECTION 68 OF THE ACT. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A) WITHOUT ANY SUCCESS. AGGRIEVED, THE ASSESSEE IS BEFORE ME. I HA VE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. IT WAS BROUGHT TO MY NOTICE BY THE LD. AR THAT THIS TRIBUNAL WAS FACED WITH A 3 ITA NO. 2378/KOL/2018 SANJAY KUMAR AGARWAL (HUF), AY: 2015-16 SAME/SIMILAR ISSUE WHEREIN AN ASSESSEE HAD CLAIMED LTCG ON SALE OF SHARES OF M/S. SULABH ENGINEERING SERVICES LTD. AND THE TRIBUNAL WAS PLEA SED TO ALLOW THE CLAIM OF THE ASSESSEE IN THE CASE OF SMT. SUMAN KOTHARI VS. ITO IN ITA NO. 2467/KOL/2017 FOR AY 2014-15 DATED 10.05.2019. I NOTE THAT THE ASSESSEE HAD PURCHASED 800 SHARES OF M/S. SESL ON 04.01.2013 FOR A TOTAL CONSIDERATION OF RS. 3,41,294/- AFTER P ERMITTING STT THROUGH M/S. JM FINANCIAL SERVICES PVT. LTD. WHICH WAS A MEMBER OF THE BSE AN D NSE AND ALSO A SEBI REGISTERED BROKER. THE CONTRACT NOTE IS FOUND PLACED AT PAGE N O. 1 OF THE PAPER BOOK (HEREINAFTER PB). THE BANK STATEMENT EVIDENCING PAYMENT MADE FOR PURC HASE OF SHARES IS NOTED FROM THE PAGE NO. 2 (BACK SIDE OF PB) WHEREIN IT IS NOTED THAT TH E PAYMENT HAS HAPPENED THROUGH BANKING CHANNEL ON 10.01.23013. THE DEMAT STATEMENT SHOWING THAT THE SHARES OF M/S. SESL IS FOUND PLACED AT PAGE 3 (PB BACK SIDE). THE DEMAT ST ATEMENT SHOWING SUPPLY OF SHARES FROM 800 TO 8000 SHARES AS ON 06.02.2013 IS ALSO SE EN PLACED AT PAGE 3 (PB BACK SIDE). I ALSO NOTE THE SALE OF 4000 OF M/S. SESL ON 18.06.20 14 FOR A TOTAL AMOUNT OF RS. 9,84,198.27/- THROUGH THE SAME BROKER AND THE CONTR ACT NOTE EVIDENCING THE SAME IS FOUND PLACED AT PAGE 5 OF THE PB. ANOTHER LOT OF 4000 SHA RES WERE SOLD ON 22.08.2014 FOR A TOTAL AMOUNT OF RS. 9,61,910.78/- AND THE CONTRACT NOTE E VIDENCING SALE IS FOUND PLACED AT PAGE 4 OF THE PB. I ALSO NOTE FROM THE BANK STATEMENT PLAC ED AT PAGE 8 OF THE PB THAT BOTH SALE CONSIDERATION HAS BEEN RECEIVED THROUGH BANKING CHA NNEL (ON 23.06.2014 AN AMOUNT OR RS. 9,84,198.27/- AND ON 01.09.2014 RS. 9,61,910.78/-). PAGE 10 OF THE PB SHOWS DEMAT STATEMENT REFLECTING SALES OF SHARES ON 18.06.2014, 4000 NUMBERS OF SHARES AND ON 22.08.2014 THE REST OF THE 4000 SHARES. I ALSO NOTE THAT ASSESSEE HAS FURNISHED ALL THE AFORESAID DOCUMENTS BEFORE THE AO VIDE LETTER DATED 08.09.2017 AND ANSWERED TO ALL HIS TWENTY QUERIES (PAGE NO. 12 AND 13 OF PB). THUS, I NOTE THAT THE ASSESSEE HAS DISCHARGED ITS ONUS ABOUT THE VERACITY OF THE TRANSACTION AND THE CLAIM MADE ON THE SALE CONSIDERATION OF SHARES OF M/S. SESL AS CLAIMED UNDER SECTION 10(38) OF THE ACT. HOWEVER, THE AO BEING INFLUENCED BY THE INVESTIGATION REPORT OF THE INVES TIGATION WING OF THE DEPARTMENT HAS TAKEN ADVERSE VIEW AGAINST THE ASSESSEE WITHOUT ANY DIREC T EVIDENCE / MATERIAL TO SUGGEST THAT THE ENTIRE CLAIM OF ASSESSEE WAS BOGUS. IN SUCH A SCENA RIO I NOTE THAT A SIMILAR ISSUE AROSE IN THE CASE OF SMT. SUMAN KOTHARI VS. ITO (SUPRA) WHEREIN THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE OF SALE OF SHARES OF M/S. SESL BY HOLDING AS UNDER: 4 ITA NO. 2378/KOL/2018 SANJAY KUMAR AGARWAL (HUF), AY: 2015-16 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE HAS SUBMITTED BEFORE US THE STATEMENT SHOWING PURCHASES AND SALE OF LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES (PB-1). THE A SSESSEE SUBMITTED ALLOTMENT ADVICE FOR 75,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. (P B-2). THE ASSESSEE SUBMITTED THE BANK DETAIL FOR PAYMENT (VIDE PB-3 TO 5). THE ASSESSEE SUBMITTE D BEFORE US NSDL STATEMENT SHOWING PREFERENTIAL ALLOTMENT OF 75000 SHARES OF M/S SULAB H ENGINEERING AND SERVICES LTD. WE NOTE THAT THE ASSESSEE ALSO SUBMITTED EXTRACT OF RESOLUTION P ASSED AND SCREENSHOT OF MONEY CONTROL SHOWING SPLITTING OF FACE VALUE FROM RS.10 TO RS. 1 OF M/S SULABH ENGINEERING AND SERVICES LTD. (PB-11 TO 13). THE ASSESSEE SUBMITTED THE NSDL STATEMENT SHOW ING ALLOTMENT OF 7,50,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. AT FAIR VALUE OF RS. 1 (PB-14 TO 17). THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT ALONG WITH INVESTMENT SCHEDUL E SHOWING 7,50,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. FOR ASSESSMENT YEAR 201 3-14 (PB-18 TO 23) WERE ALSO SUBMITTED. THE ASSESSEE ALSO SUBMITTED THE SALE BILL ALONG WITH CO NTRACT NOTE FROM BROKER FOR SALE OF 1,25,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD. (P B-23 TO 46). THE BROKERS STATEMENT SHOWING PAYMENT MADE FOR THE SALE HAS ALSO BEEN SUBMITTED B Y THE ASSESSEE,(VIDE PB-47 TO 59). THE BANK STATEMENT REFLECTING RECEIPT OF SALE CONSIDERATION FOR SALE OF 1,25,000 SHARES OF M/S SULABH ENGINEERS AND SERVICES LTD IS PLACED IN PAPER BOOK VIDE,(PB-60 TO 63). THE PROFIT & LOSS ACCOUNT AND COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2014- 15 (PB-64 TO 69) WERE ALSO PLACED IN THE PAPER BOOK. WITH HELP OF THESE PLETHORA DOCUMENTS A ND EVIDENCES, THE LD COUNSEL CLAIMED THAT LONG TERM CAPITAL GAIN ON SALE OF EQUITY SHARES OF SULABH ENGINEERING AND SERVICES LTD. OF RS. 1,12,13,010/-DURING THE CURRENT FINANCIAL YEAR, IS GENUINE. 5. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DEC ISION AND TAKING NOTE OF THE DOCUMENTS FILED WHICH WAS DISCUSSED IN DETAIL, I AM INCLINED TO ALLOW THE CLAIM OF THE ASSESSEE AND DIRECT DELETION OF THE ADDITION OF RS. 15,95,720/-. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 7TH AUGUST, 2019. SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 7TH AUGUST, 2019 BIDHAN (P.S.) 5 ITA NO. 2378/KOL/2018 SANJAY KUMAR AGARWAL (HUF), AY: 2015-16 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SANJAY KUMAR AGARWAL (HUF), RITZ COURT , FLAT NO. 317, 3RD FLOOR, SAPUIPARA(EAST), BALLY, HOWRAH-711227. 2 RESPONDENT ITO, WARD-48(4), KOLKATA. 3 CIT(A)-14, KOLKATA. (SENT THROUGH E-MAIL) 4 CIT , KOLKATA 5 DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E -MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR