NITIN GARG HUF,NEW DELHI vs. ITO WARD - 29(4), NEW DELHI

This appeal is preferred by the Assessee against the order dated 14.11.2019 of the Commissioner of Income-tax (Appeals)-XXV, New Delhi (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.10145/19-20 arising out of the appeal before it against the order dated 21.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ITO, Ward-29(4), New Delhi (hereinafter referred to as the Ld. AO).

Heard and perused the records. The appellant declared capital gain of 44,22,027/- on sale of shares of Goldline International Finvest Ltd which has been claimed exempt U/s 10(38) of the Act). The same wase disallowed and the addition of Rs.44,22,027/- was made u/s 68 of the Income Tax Act and also of Rs 88,440/- u/s 69C, being commission @2% on 44,22,027/-. The scrip of M/s Goldline International Finvest Ltd. was purchased in month of April, 2013 and was sold in the month of May & My 2014. On perusal of the details filed by the assessee, it is found that assessee has Long term Capital Gains on:-

On analysis of LTCG transaction, the details of profit earned from sale purchase transactions are captioned here under: - Scrip Purchase Demat a/c Purcha- Sale date Demat a/c Price Net gain or Date (by credit date se (by value of debit date loss value of * consid- stock used stock eration in used in calculation) calculate- on Goldline 15.04.201 15.04.201 50,000 27.05.2014 27.05.2014 Rs. 15,47,000/ Internatio- 3 4 442.00 na1 Finest 08.07.2014 08.07.2014 Rs 14,86,512/ 449.50 15.07.2014 15.07.2014 14,83,515/ Total 45,17,027/

Ld. AR has submitted that both the purchase of share as well as sale is genuine and submitted that said equity shares of Goldline International Finvest Ltd have been purchased through banking channel (and the said shares have not been purchased through cash. The Investment have not been made in shares during A Y 2015-16 but during A Y 2014-15. The shares are dematerialized with National Securities Depository Ltd (NSDL). The appellant sold 9500 equity shares of Goldline International Finvest Ltd out of 50000 equity shares purchased during A Y 2014- 15 and the shares have been sold through SEBI registered broker M/s Share India Securities Ltd and the said broker is also registered with BSE, NSE and MCX and there is no allegation against said broker. The shares have been sold on 27/05/2014, 08/07/2014 and 15/07/2014 through Bombay stock exchange through screen-based system and there was no manual interference. The shares so sold have settlement number and contract note number generated through Bombay Stock exchange. The said sales of shares of Goldline International Finvest Ltd were also subjected to securities transaction tax STT on sale. The entire sale proceeds were received through cheque and duly found credited in the bank account of the assessee and the same have been admitted by the learned Assessing officer in of assessment order. Ld. AR submitted that there is no document or allegation that the assessee delivered cash in exchange of the sales price received through cheques. The sale price as on the date of transaction is also the prevailing price in the stock exchange. Hence it is not a case of the Assessing Officer that the assessee has shown an inflated sale price which is not as per the prevailing market price of the shares of M/s Goldline International Finvest Ltd. No adverse inference has been made by the learned AO in respect of balance investment of equity share of 40500 equity shares of Gold line International Finvest Ltd which is being hold as on 31/03/2015 by the appellant

Ld. DR has relied the orders and we find that the exemption in respect of long-term capital gain on sale of shares were denied on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. The Id AO observed that price of share of Gold Line International Finvest Limited increased manifold by 4955% which is not supported by the financials and appellant earned unrealistic return.

Further we find that Hon’ble Delhi High court in the case of Principal Commissioner of Income Tax - 12 , Delhi Vs Krishna Devi dated 15/01/2021 examining issue related to capital gain on sale of shares of alleged penny stock Gold Line International Finvest Limited, had held it to be a genuinely traded scrip. In the para no 11 of Judgement Delhi High court observed as under: - “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. 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.