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Income Tax Appellate Tribunal, DELHI BENCH “F” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the assessee against the impugned order dated 26.11.2018, passed by Ld. Commissioner of Income Tax (Appeals)-XII, New Delhi for the quantum of assessment passed u/s.147/143(3) for the Assessment Year 2013-14.
2. In the grounds of appeal, the assessee has challenged, firstly, the validity of reopening u/s.148 on the ground that ld. Assessing Officer has not disposed of the objection raised by the assessee against notice issued u/s.148; secondly, addition of Rs.1,77,24,158 made by the Assessing Officer on account of claim of Long Term Capital Gain arising from sale of shares of M/s. CCL International Ltd. as sham transaction to added as undisclosed income u/s.68 of the Act; and lastly, addition of Rs.1,77,251/- made under Section 69C on the ground that cash commission must have been paid @ 1% on the alleged bogus Long Term Capital Gain.
The facts in brief are that the assessee has applied for 50,000 shares of M/s. AAR Infrastructure Ltd. for the face value of Rs.10/- per share and paid consideration of Rs.5,00,000/- vide cheque no. 169799 dated 13.01.2011. The assessee was allotted 50,000 equity shares on 17.2.2011. After receiving the allotment letter, all the share were dematerialized by the assessee in her Demat account on 26.4.2011. Thereafter, M/s. AAR Infrastructure Ltd. got amalgamated with M/s. CCL International Ltd. and according to the amalgamation scheme, the assessee received 1,25,000 shares of M/s. CCL International Ltd., in the proportion of 250 equity shares of Rs.2 per share and 100 equity shares of Rs.10 per share. These shares which were allotted on 17.2.2011 were sold for Rs.1,82,76,483 between 29.08.2012 to 10.10.2012. Accordingly, Long Term Capital Gain of Rs.1,77,25,158/- was claimed in the return of income filed for the Assessment Year 2013-14. The case was reopened u/s.147 on the ground that income of Rs.1,82,76,483/- has escaped assessment for failure on the part of the assessee to explain the source of deposit. In response to the notice u/s 148 issued on 11.08.2016 and notice u/s 142(1) dated 29.11.2016 by the AO, the assessee has filed detail the objections before the Assessing Officer vide letter dated 23.05.2017. However, the said objections have neither been disposed off by the Assessing Officer nor it has been discussed or dealt with in the assessment order. The CIT (A), before whom this issue was raised, has been dismissed by him on the ground that no such objection was raised.
4. Before us, ld. counsel for the assessee, Mr. Manoj Patwari, had filed a copy of RTI application filed before the Assessing Officer/ Income Tax Department seeking certified copies of objections filed by the assessee before the Assessing Officer against the reopening of assessment. In response, the Assessing Officer has provided the copy of objections as available on record and it has been confirmed by the department that such objection was filed. He pointed out that Ld. CIT (A) has wrongly dismissed the said ground by doubting that such an objection has never filed before the Assessing Officer. This finding of the Ld. CIT (A) is erroneous in the wake of the copy of objections filed before the Assessing Officer which has been placed in the paper book from pages 4 to 16, and also the Assessing Officer himself has now acknowledged that same was filed by the assessee. Thus, he submitted that Assessing Officer has failed in his statutory duty to dispose off the objections by way of comprehensive order, which is in clear cut violation of law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC). He submitted that such a non-disposal of objection leads to quashing of the entire proceedings u/s.147. In support, he strongly relied upon the judgment of Hon’ble Gujarat High court in the case of Vishwanath Engineers vs. ACIT, (2013) 352 ITR 549 (Guj.); and also relied upon the judgment of ITAT Delhi Bench in the case of Shri Aman Sharma vs. Asst.CIT, in ITA No.7026/Del/2014. He further relied upon the judgment of Hon’ble Bombay High Court in the case of KSS Petron Pvt. Ltd. vs. ITO, in of 2014, wherein the Hon’ble High Court upheld the quashing of the assessment passed in the violation of law laid down by the Hon’ble Supreme Court in the case of G.K.N. Driveshaft (supra). Lastly, he strongly relied upon the judgment of Hon’ble Jurisdictional Delhi High court judgement in the case of PCIT vs. Tupperware India Ltd., (2016) 284 CTR 0068 (Del)
On the other hand, ld. DR relied upon the judgment of Hon’ble Madras High Court in the case of Home Finders Housing Ltd. v. ITO (2018) 404 ITR 611 (Mad.), wherein the Hon’ble High Court has held that Assessing Officer is though bound to dispose of the objection by passing a speaking order, but assessment cannot be quashed and matter should be sent back to the Assessing Officer to dispose of the objections. Thus, in this case also matter should be restored to the Assessing Officer.
We have heard the rival submissions and also perused the relevant material placed on record on the validity of reopening challenged by the assessee on the ground that Assessing Officer has not disposed off the objections filed in response to notice u/s.148 in view of principle laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (supra). From the records, it is clearly borne out that assessee did filed a detailed objections before the Assessing Officer vide letter dated 23.05.2017 challenging the validity of reopening u/s 147/148 on various counts. Such an objection filed by the assessee, admittedly has not been disposed off by the Assessing Officer either by way of any separate order or even in the impugned assessment order. In fact entire assessment order is silent on this issue. Thus, there is a gross violation of the principle of the law laid down by the Hon’ble Apex Court in case of GKN Driveshafts (supra), whereby the Assessing Officer is bound to disclose the ‘reasons’ for re-assessment within reasonable time and assessee is entitled to raise objections if any; and if such objections has been filed, then AO is bound to pass a speaking order dealing with the objections before proceeding the reassessment in terms of the notice given earlier. As pointed out by the ld. counsel for the assessee, Hon’ble Gujarat High Court and Hon’ble Bombay High Court have come down very heavily on such non- disposal of the objections by the Assessing Officer and have gone ahead to quash such reassessment proceedings and the assessment order itself. The Hon’ble Delhi High Court in the case of PCIT vs. Tupperware India Pvt. Ltd. (supra) had also quashed such an assessment order where Assessing Officer has failed to dispose off the objections filed by the assessee, after observing and holding as under:
“5. Apparently, the Assessee did raise an objection to the order of the AO reopening the assessment. In the order dated 28th January 2011 allowing the Assessee's appeal, the Commissioner of Income Tax (Appeals) ['CIT (A)'] noted that the Assessee had indeed filed objections to the reopening of the assessment by its letter dated 9th August 2006. In the remand report dated 20th December 2010, the AO quoted a paragraph from the order sheet which stated that the aforementioned letter dated 9th August 2006 had been handed over to the AO and that the AO had sought some more information which the Assessee had not filed. The CIT (A) accordingly held that by stating that no objections had been filed, the AO had "very conveniently disregarded the guidelines" laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19/[2002] 125 Taxman 963. The CIT (A), therefore, agreed with the Assessee that since the procedure laid down by the SC in the aforementioned decision was mandatory, the AO had in fact not disposed of the objections by a speaking order. Nevertheless, the CIT (A) held that the said defect "does not make the assessment order illegal and hence it cannot be quashed. It is a technical mistake which is curable."
6. The Court is of the considered view that after having correctly understood the decision of the Supreme Court in GKN Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment.” Xxx xxxxx xxxx xxxx xxxx xxxx xxxx
9. Consequently, for both the aforementioned reasons, viz., that there was a failure by the AO to comply with the mandatory requirement of disposing of the objections of the Assessee to the reopening in terms of the law explained by the Supreme Court in G.K.N. Driveshafts (India) Ltd. (supra) as well as on account of the failure of the Revenue to challenge before the ITAT the order of the CIT (A) deleting on merits the disallowance made by the AO of the management service fee consequent upon reopening of the assessment, there appears to be no need to examine the issue projected by the Revenue in this appeal viz., the justification for re- opening the assessment under Section 147/148 of the Act.”
7. It has come to our notice that in a recent judgment of Hon’ble Delhi High Court in the case of Surender Kumar Jain vs. PCIT in W.P. (C) No.593/2019 at CM No. 20670/2019, vide judgment and order dated 29.07.2019 has observed and held as under: 1. On 18th March, 2019, the following order was passed by this Court: “The matter has been listed before this Court as the DB-11 has not assembled today. Learned counsel for the petitioner submits that the Assessment for the Year 2011-2012 pertaining to the petitioner has been reopened. While the reasons to believe have been served upon the petitioner, but before the objections could be decided, a final order has been passed. Reliance has been placed on various judgments of this Court, including the judgment passed in the case of Smt. Kamlesh Sharma v. B.L. Meena, Income-Tax Officer and Others, reported at [2006] 287 1TR 337(Del). Notice to show cause as to why the petition be not admitted. Notice in the stay application as well. Counsel for the respondent enters appearance. He submits that the submission sought to be urged, in fact, is not an absolute Rule, lie submits that the reasons to believe have already been supplied to the petitioner. He seeks time to file reply. List before the Roster Bench on 10.04.2019. Till the next date of hearing, no coercive action shall be taken against the petitioner.”
The short point involved in the present petition is whether the Assessing Officer (AO) could have proceeded to finalise the reassessment pursuant to notices issued under Section 147/148 of the Income Tax Act, 1961 (the ‘Act’) without the procedure laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) being complied with? 3. This Court has emphasised in several decisions that the procedure outlined by the Supreme Court in GKN Driveshafts (India) Ltd. (supra) is sacrosanct. In other words, where in response to a notice issued under Section 147 by the AO, the Assessee seeks the reasons to believe that prompted the re- opening, and files objections thereto, those objections have to be considered on their merits and only a reasoned order has to be passed thereon by the AO. Importantly, this has to happen prior to the AO proceeding with the re-assessment.
In Sabh Infrastructure Ltd. v. ACIT, (2017) 398 ITR 198 (Del), in similar circumstances, this Court observed that held as under: “19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (iv) The exercise of considering the Assessee’s objections to the reopening of assessment is not a mechanical ritual. It is a quasi- judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already be disclosed.”
5. In the present case, the AO has not chosen to dispose of the objections, filed by the Petitioner against the reopening of the assessment but has proceeded to the stage of passing the reassessment order itself.
6. In almost an identical fact situation in Smt. Kamlesh Shanna w B.L. Meena, Income-Tax Officer (supra), where the AO did not pass any speaking order but straightaway passed an assessment order, and simultaneously rejected the contention of the Petitioner, this Court observed: “3. We are of the opinion that in view of the language of the Supreme Court in GKN Drives hafts [2003] 259 ITR 19 the Assessing Officer should have rejected the objections, if he thought it appropriate to do so, before passing the final order and not simultaneously.
4. This position was reiterated by this Court in Sita World Travels (India) Ltd. v. CIT (2004) 140 Taxman 381 (Del).
5. We cannot appreciate how, in spite of the clear language used by the Supreme Court as well as this Court, the Assessing Officer did not comply with the requirement of law.”
This Court has, therefore, no hesitation in setting aside reassessment order dated 29th December, 2018 for the Assessment Year AY 2011-12. Consequently, a direction is issued to the AO to once again take up for consideration, the Petitioner’s objections to the reopening of the assessment for the aforementioned AY and dispose of those objections by a reasoned order not later than four weeks from today. The said order shall be communicated to the Petitioner not later one week thereafter.
8. Thereafter, the AO will proceed in accordance with law as far as the reassessment proceedings are concerned.
It will be open to the Petitioner to seek appropriate remedies if his objections to the reopening of the assessment are rejected by the AO.
The writ petition and application are disposed of in the above terms.”
7. Though the Hon’ble Jurisdictional High Court in the writ jurisdiction has set aside the re-assessment order with a direction to the Assessing Officer to again take up the objection and dispose of the objections by passing a reasoned order and also give liberty to the petitioner/assessee to seek appropriate remedies with the objection which has been rejected by the Assessing Officer. Now here in this case, the Assessing Officer had passed the assessment order without adhering to the process of law and not only that, the ground raised before the Ld. CIT(A) on this point has been rejected on the erroneous presumption that such an objection has not been filed which fact is found to be not correct. Thus, here the stage of first appeal has also been crossed and assessee’s objection remains indisposed off. If a law mandates the Assessing Officer to act in a specific manner especially in the case of jurisdictional issue relating to Section 147, then he has to adhere to the mandate of the law; and if there is any violation of such law, the consequence is fatal to the entire reassessment proceedings and results into quashing of the assessment itself. The assessee here in this case was denied remedy to challenge the action u/s 147/148, had the objections been disposed off adversely to the assessee. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Tupperware India (supra) as noted above has clearly opined that such a failure to comply the law laid down by the Hon’ble Supreme Court should have resulted in quashing of the reassessment. Accordingly, if the above principle and the ratio laid down by the Hon’ble High Courts cited above and by the Hon’ble Jurisdictional High Court is to be followed, then we are of the opinion that on this ground alone the impugned re- assessment order is liable to be quashed and at this stage we are not inclined to set aside this issue to Assessing Officer for deciding this matter when substantial time has lapsed and two stages have been crossed. Be that as may be, we are proceeding to decide the issue on merits as argued by the parties.
On merits of the addition, we find that Ld. Assessing Officer, first of all noted that M/s. CCL International Ltd. is traded in Bombay Stock Exchange under the security ID M/s. CCL International with the security code no. 531900. He has incorporated the financials of the company as per the balance sheet available in the public domain which has been incorporated in paragraph 2 of the order from pages 2 to 5 of the assessment order. Assessing Officer observed that shares of M/s. AAR Infrastructure Ltd. were later on merged in M/s.
CCL International Ltd. and then on 09.02.2012 these shares were allotted to various beneficiaries. However, for making such an observation, no such information or material has been stated in the assessment order. Thereafter, he has noted that trading in shares of M/s. CCL International was suspended by BSE in the year 2010 and it has been revoked also in the same year. He has also analyzed the effect of allotment of shares by M/s. AAR Infrastructure just before the amalgamation date and the pre-split closing price in stock exchange and how the split price of the share kept on rising just in a matter of few months. He has also analyzed the rise of the scrip from Rs.11.10 per share to Rs.129 in the period of 6 months in the year 2010, i.e., between 6.02.2010 to 23.08.2010 during which the price of the scrip had risen from Rs.15/- to Rs.157/- and it kept on increasing. He has even tabulated the history of price rise, volume of transaction undertaken in stock exchange, average price of each date when shares were traded in the BSE and the closing rate, right from the period 06.02.2010 to 25.11.2014, i.e., for almost 5 years and found that the highest price went up to Rs.630/-. Thus, he concluded that there was increase of 1160% in just one year.
9. After narrating the history of price quotation in the stock exchange, Assessing Officer has made reference to the general modus operandi adopted by various brokers which was unearthed during the investigation carried out by Kolkata Director of Investigation. He then observes that financial status of M/s. CCL International was not very sound and the said company was not engaged into any substantial activity. But still the share price kept on rising which proves that prices were rigged in the stock exchange through manipulation. Further, various brokers whose statements were recorded by the Investigation Wing, it was found that the shares of the CCL International were facilitated for providing bogus entry to various persons. After detailed discussion and discussing various case laws, Assessing Officer held that amount credited in the bank account of the assessee out of purported sale of shares is in the nature of bogus long term capital gain which is taxable u/s.68. However he has taxed only net long term capital gain and not the entire amount. He further made disallowance of commission @ 1% u/s.69C on notional basis on account of alleged commission which must have been paid to such accommodation entry.
10. Ld. CIT (A) in his ex-parte order has confirmed the said reasoning and the order of the Assessing Officer.
Before us, the ld. counsel for the assessee drew our attention to the scrip-wise chronology of events which is as under: Share Script Description Description A.Y. 2013-14 M/s. CCL International Limited (AAR Infrastructure Ltd.) No. of shares 50000 Acknowledgment Receipt Available Share Allotment Letter 17.02.2011
Share Certificate N.A. Bank Statement 13.01.2011-500000 (Paid) Subdivision of shares 18.06.2012 Dematerialization Request filed 26.04.2011 on Broker statement Available Contract Notes Sale of 125000 shares from 31.08.2012-31.10.2012 Sale consideration 1,82,26,175 Long Term Capital Gain claimed 1,77,25,158 Total LTCG claimed 1,77,25,158 Period of holding 20 months Turnover at the time of Sale (in 78.89 cr Rs.) Turnover at the time of 53.94 cr Purchase (in Rs.) Profit before tax at the time of 2.30 cr Sale (in Rs.) Profit before tax at the time of 1.14 cr Purchase (in Rs.)
After giving the aforesaid details of purchase of shares, dematerialization, holding period and sale, he submitted that all the shares were sold through stock exchange with entire particulars and after paying STT through recognized stock broker, M/s. Indianiesh Securities Pvt. Ltd. and the sale consideration was received in the bank account reflected the sales proceeds. He further pointed out that the SEBI had neither issued any prohibition for dealing in share of CCL Ltd. nor the trading of shares of M/s. CCL International was ever suspended by the SEBI, atleast no corroborative evidence was brought on record to show that M/s. CCL International Ltd. was de-listed from SEBI. He submitted that when assessee transacted in the shares it was listed in stock exchange and were traded freely in huge volume and it is still being traded in present also. In support, he has also given the proof of live share trading as on date. Regarding financial status which has been adversely commented by the Assessing Officer he submitted the following financial position of the company available from the records:
M/s CCL International Limited Total Revenue (in Cr.) PBT (in Cr) Mar 07 39.15 0.28 Mar 08 46.47 0.57 Mar 09 49.63 0.23 Mar 10 55.24 1.21 Mar 11 53.94 1.14 Mar 12 72.97 0.97 Mar 13 78.89 2.30 Mar 14 1.39 80.20
Further, there is no statement of the share broker of the assessee nor any inquiry has been conducted by the Assessing Officer that this was a sham transaction. In none of the statement of brokers reproduced in the assessment order there is any whisper the assessee’s broker, M/s. Indianivesh Securities Pvt. Ltd. was indulged in any such activities. There is no direct or indirect material or statement that assessee was either beneficiary or was indulged in bogus transaction. The assessee has duly discharged the onus by proving the genuineness of the transaction by filing all the details relating to purchase, dematerialization which was done immediately after the purchase and sale which almost after one and a half years and all the documentary have been produced to prove the genuineness of the Long Term Capital Gain. In respect of same scrip, he has filed the decision of Co-ordinate Bench in the case of Deep Nagar vs. ACIT, order dated 12.06.2019 to show that trading in these shares and LTCG has been accepted to be genuine and also following decision of Co-ordinate Benches dealing in the same scrip:- (a) Smt. Sumita Hinger vs. ITO, Ward - 22 (1) 2019 (7) TMI 529 (Kolkata LTAT) (b) Ramesh Chandra K. Shah Versus ACIT Central Circle- 30), 2019 (2) ITA No. 113/Kol/2018(Kolkata ITAT). (c) Mukta Gupta, Mohan Lai Agarwal (Huf) Versus Ito, Ward-1 (4), Ghaziabad vide I.T.A. No.2766/DEL/2018, I.T.A. No.2767/DEL/2018 dated 26.09.2018. (d) Commissioner of Income Tax-1 vs Mahesh chandra G. Vakil (2013) 10 taxmann.com 326 (Gujrat High Court) (e) Commissioner of Income tax-1 vs Himani M Vakil (2013) 10 taxmann.com 326 (Gujrat High Court)”
Lastly, he also stated that all though no statement of the assessee’s broker has been recorded nor any inquiry has been made, but even if the Assessing Officer is relying upon some 3rd party broker’s statement not related to the assessee nor dealt by the assessee then same cannot be relied without allowing any cross objection of such brokers. Thus, no addition is warranted.
On the other hand, ld. Senior DR strongly relied upon the order of the Assessing Officer and Ld. CIT(A) and submitted that here in this case the shares have been purchased at Rs.5 lac which has been sold for more than Rs.1.82 crores within span of 14 months and Assessing Officer has discussed in detail how the price in the stock exchange was rigged solely to benefit the beneficiaries when investigation wing after detailed inquiry have found from various broker that they have provided accommodation entry to various persons in this scrip, then strong presumption goes that the assessee too has taken accommodation entry. Lastly, he strongly relied upon the judgment of Hon’ble High Court in the Udit Kalra vs. ITO, order dated March 8, 2019,
We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as material referred to before us. As stated above, the assessee has applied for 50,000 shares of M/s. AAR Infrastructure Ltd. for face value of Rs.10 and paid consideration of Rs.5 lacs vide cheque no.169799 dated 13.01.2011. The said purchase has been recorded in the accounts of the earlier year and is also reflected from the copy of bank statement place at paper book at pages 25. The purchases made in the earlier years have been accepted as only net LTCG has been taxed by the Assessing Officer. The assessee was allotted shares of M/s. AAR Infrastructure Ltd. and immediately thereafter, the assessee had dematerialised the shares on 26.02.2011 which is evident from the copy of Demat account enclosed at pages 27 to 28 of the paper book. Later, M/s. AAR Infrastructure got amalgamated with M/s. CCL International Ltd. and according to amalgamation scheme, the assessee received 1,25,000 shares of M/s. CCL International Ltd. in the proportion of 250 equity shares Rs.2 per share and Rs.100 equity share of Rs.10 per share. The shares which were allotted on 17.02.2011 have been sold after period of more than 18 to 20 months, i.e., on 29.08.2012 to 10.10.2012. The said shares have been sold through stock broker M/s. Indianivesh Securities Pvt. Ltd.
Before us the ld. counsel has in his brief note has stated that following documents and statements were filed before the authorities below: (a) All the transactions were supported by proper Contracts Notes and delivery of shares was made through De-mat Account with stock broker, M/s Indianivesh Securities Pvt. Ltd. (who is the member of BSE and registered with SEBI). The shares were sold in the open market. The appellant has fulfilled all the condition u/s 10(38) of the Income Tax Act, 1961. The appellant has already filed National Security Depository Limited generated Demat Account and the broker statement relating to the sale of share in our paper book, also relevant demat statement highlighting the shares purchased has already been submitted before the Ld. AO.
b) The appellant has earned long term capital gain through genuine purchase and sale of shares of the listed companies in normal course. There was no default on the part of the appellant. Moreover, the appellant has earned the income strictly following the norms and guidelines of SEBI. If M/s CCL International has been identified as BSE Listed penny stock, the appellant is not even remotely connected with these companies. She was not at all in a position to influence the purchase and sale prices of their shares. Hardship cannot be brought on the appellant, if default is made by the company which is listed in the BSE. c) In support of the genuineness of the transaction the appellant produced the following at the time of assessment proceeding: a) Copy of allotment letter issued by M/s AAR Infrastructures Limited. (Page 25) b) Copy of bank statement reflecting the payment made for the purchase of 50000 equity shares. (Page 26) c) Copy of Demat Account of the appellant. (Page 27) d) Copy of statement of broker reflecting the credit of 50000 equity share through preferential allotment. (Page 28) e) Copy of order of Delhi High Court, dated 08.10.2011 in the matter of amalgamation of M/s AAR Infrastructure Limited into M/s CCL International Limited. (Page 29-44) f) Copy of Contacts notes reflecting the sale proceeds. (Page 45-50) g) Copy of Transaction statement reflecting the increase in the number of shares. (Page 51) h) Copy of Bank Statement of the appellant reflecting the amount received on sale of shares. (Page 54).
The entire premise of the Assessing Officer for treating the entire transaction to be a bogus Long Term Capital Gain and making addition u/s. 68 is that, firstly, M/s. CCL International Ltd. did not have much financial worth to justify such a price rise; secondly, the SEBI had suspended the trade of the share for a brief period; thirdly, he has pointed out the history of price rise between 06.02.2010 to 25.11.2014 and then has drawn adverse inference that price of these shares were manipulated and rigged in the stock exchange which was solely to provide accommodation entries to the various parties; and lastly, he has also referred to certain inquiry report of Investigation Wing Kolkata during the course of which certain brokers have admitted that they had provided accommodation entries in the scrip of M/s. CCL International. But nowhere in the entire assessment order, there is any reference to any material or evidence that assessee or assessee’s broker have been found to be indulged in any kind of accommodation entry in this scrip. No inquiry whatsoever has been made from the broker of the assessee. Further, during the period in which assessee had purchased the shares and had sold them whether the SEBI had suspended the trading has not been mentioned, in fact, Assessing Officer himself mentions that there was brief suspension in the year 2010, whereas the assessee has purchased shares in the year 2011 and sold them in the year 2012. Coming to the financials, as culled out from the records, the revenue from the operation of M/s. CCL International Ltd. from March, 2010 to March, 2012 was between Rs. 55.25 crore to Rs. 79 crore. Thus, it cannot be held that it was mere a paper entity. From a bare perusal of the history of listing and trading of shares and the quote of Bombay Stock Exchange as quoted in the assessment order, it clearly reflects that as on 06.02.2010, the closing price was Rs. 50 and there was a steady increase and within the period of 4 years the price had reached up to Rs.609 on 25.11.2014. Nowhere, it has been pointed out that the rise was beyond the cap laid down by the SEBI, because the price of the scrip cannot rise beyond the cap prescribed by the SEBI. If the shares have been purchased and sold from the stock exchange on a quoted price with proper contract number, trade time and after paying STT, then it is very difficult to assume that the sale proceeds received from sale of such shares is bogus, especially when purchase of shares are not in dispute. This inter alia means assessee was in possession of shares which were also dematerialised. To prove that such a transaction was in the nature of bogus or colourable transaction, there has to be some inquiry or material to nail the assessee that she was some kind of a beneficiary in some accommodation entry operation. No defect has been pointed out in the documents submitted by the assessee nor has the broker of the assessee been inquired upon. Simply relying upon the general modus operandi and statement of some brokers recorded by the Kolkata Investigation Wing does not mean that all the transactions undertaken of the scrip M/s. CCL International Ltd. through the country by millions of subscribers are bogus. Thus, in absence of any material or evidence against the assessee, we do not find any reason as to why the claim of Long Term Capital Gain from sale of such share should be denied. Consequently, the addition on account of commission is also deleted. Accordingly, we delete the addition made by the Assessing Officer.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 7th October, 2019.