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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MANISH BORAD&
Both the appeals filed by the same assessee are directed against the order both dated 14.01.2019 passed by the Ld. CIT(A)-II, Indore arising out of the separate orders dated 23.12.2016 & 10.10.2017 passed by the ITO- 5(1), Indore under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for A.Y. 2014-15 & 2015-16 respectively.
The matter relates to disallowance of exemption under Section 10(38) of the Act in respect of long-term capital gain arising from sale of equity shares of M/s. Sun Rise Asian Ltd. (listed on Bombay Stock Exchange) treating it income from undisclosed sources. &484/Ind/2019 Aniruddha Nyati vs. ITO Asst.Years –2014-15 & 2015-16 - 2 – 3. is taken as the lead case.
The brief facts leading to the case is this that the assessee filed its return of income on 16.07.2014 showing income at Rs. 5,32,280/-. The assessee has shown LTCG at Rs. 23,67,269/- and claimed exemption under Section 10(38) of the Act. The assessee has purchased 7500 shares of M/s. Sun Rise Asian for F.Y. 2012-13 from Konart Traders Ltd. for total cost of Rs. 1,50,000/- on 13.09.2011 as per the bill issued by the Konart Traders Ltd. The assessee was engaged in the intra-day trading of shares through brokers namely Swastika Invest Mart Ltd. It is the case of the assessee that the equity shares were hold for more than 12 months and the sale also took place on a recognized stock exchange. Shares were transferred from Demat account thereby fulfilling all the conditions provided under Section 10(38) of the Act. On the basis of the information available from the third sources including the outcome of Search & Survey action of various brokers of stock exchange across the country and upon the finding of the Investigation Wing about bogus entries and manipulation through penny stock companies, the Ld. AO concluded that M/s. Sunrise Asian Ltd. (SAL) is a penny stock company and the long term capital gain arising out of the sale the strive company is an accommodation entry taken for converting unaccounted money into exempt income. The claim of exemption to the tune of Rs. 23,67,269/- was, therefore, denied and added to the total income of the assessee which was, in turn, confirmed by the First Appellate Authority and hence the instant appeal before us.
We have heard the respective parties and perused the relevant materials available on record. &484/Ind/2019 Aniruddha Nyati vs. ITO Asst.Years –2014-15 & 2015-16 - 3 – 5. It appears from the record that the 7500 equity shares at Rs. 20 each on 17.09.2011 of M/s. Sun Rise Asian Ltd. (SAL) was purchased from Konart Traders Ltd. for total cost of Rs. 1,50,000/- through broker namely Swastika Investment Ltd. Such were purchased in physical form through banking channel. The shares were lodged for dematerialization with Stock Holding Corporation on 14.01.2013 and the same were duly dematerialized in its course of time. The same was sold during F.Y. 2013-14 through Swastika Investment Ltd. when the sale price of such share was Rs. 490/-. Finally the appellant claimed for exemption under Section 10(38) of the Act to the tune of Rs. 23,67,269/-.
It appears as also submitted by the Ld. Counsel appearing for the assessee that the issue is squarely covered in a series of judgments passed by the Coordinate Bench in ITA No. 703to705/Ind/2018 & 488/Ind/2019 for A.Y. 2014-15 wherein the scrips of (SAL) listed at BSE has been held to be a genuine transaction, neither a penny stock nor a paper company. In fact, the identical issue was also decided in favour of the assessee by allowing the exempt long term capital gain arising out of the sale of shares of the said company by the ITAT Mumbai Bench in the case of Dipesh Ramesh Vardhan vs. DCIT in ITA No. 764/Mum/2019 on 11.08.2020 and the Coordinate Bench of Jaipur in the case of Ashok Agrawal & others in ITA No. 124/JP/2020 on 18.11.2020. While the Coordinate Bench allowing the appeal preferred by the assessee on the similar issue in ITA No. 203/Ind/2019, 703 to 705/Ind/2018 and 488/Ind/2019 relied upon the judgments passed by the two aforesaid &484/Ind/2019 Aniruddha Nyati vs. ITO Asst.Years –2014-15 & 2015-16 - 4 – benches. The Coordinate Bench was pleased of observed the following while deciding the issue in favour of the assessee:- “16. We therefore in the light of the above discussion and in the entirety of facts and circumstances of the case and respectfully following the judgment of the Co-ordinate Benches in cases referred (supra) consistently holding that “Sunrise Asian Limited” is neither a penny stock nor a paper company, are of the considered view that as all the five assessee(s) namely Kumari Ayushi Nyati ,Smt. Vijay Nyati, Shri Vijay Kumar Radheshyam Nyati (HUF), Shri Manish Kumar Radheshyam Nyati (HUF), Smt. Mamta Nyati have discharged necessary onus casted upon them in terms of claim of exemption of Long Term Capital Gain u/s 10(38) of the Act by establishing the genuineness of transaction of purchase and sale of shares and satisfying the requisite conditions specified therein and the Long Term Capital Gain so arisen has been rightly claimed as exempt u/s 10(38) of the Act. Since we have held the transaction of Long Term Capital Gain as genuine no addition for estimated brokerage expense of Rs.72,281/- is thus called for in the case of Miss. Ayushi Nyati. We therefore allow the common issues raised in all the instant appeals in favour of the assessee(s) and set aside the order of Ld. CIT(A) and allow the claim of LTCG exemption u/s 10(38) of the Act from sale of equity shares of “SAL” and delete the following additions:-
S.No. Name Amount 1 Ms. Ayushi Nyati Rs. 36,14,053/- 2 Smt. Vijaya Nyati Rs. 33,98,387/- 3 Shri Vijay Kumar Rs. 35,01,004/- Radheshyam Nyati HUF
4 Shri Manish Kumar Rs. 33,25,952/- Radheshyam Nyati HUF
5 Smt. Mamta Nyati Rs. 35,99,598/-
Accordingly all the grounds raised
by the assessee(s) are allowed.
18. In the result appeals of the assessee(s) namely Kumari Ayushi Nyati (ITA No.203/Ind/2019), Smt. Vijay Nyati (ITA No.703/Ind/2018), Shri Vijay Kumar Radheshyam Nyati (HUF) (ITA No.704/Ind/2018), Shri Manish Kumar Radheshyam Nyati (HUF) (ITA No.705/Ind/2018), Smt. Mamta Nyati (ITA No.488/Ind/2019), are allowed.” &484/Ind/2019 Aniruddha Nyati vs. ITO Asst.Years –2014-15 & 2015-16 - 5 –
We find that the facts mentioned in the judgments above referred is similar to that of the facts narrated in the appeal before us and, thus, in the absence of any changed circumstances respectfully relying upon the same we allow the appeal preferred by the assessee.
ITA No. 484/Ind/2019 (A.Y. 2015-16):-
The identical issue involved in the case has already been dealt with by us in A.Y. 2014-15 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, the appeal preferred by the assessee is allowed.