MRS. SANTHOSH,CHENNAI vs. ITO NON CORPORATE WARD 10 (4), CHENNAI

It was submitted by ld.A.R that the issue in this appeal was against the action of the Ld.CIT(A) in confirming the addition made by ld. Assessing Officer in treating the purchase and sale of shares by the assessee in M/s.Global Infratech & Finance Ltd., as penny stock transactions. It was the prayer that the claim of exemption u/s.10(38) of the Act on the long term capital gains on sale of shares may be allowed.

In reply, it was submitted by ld.D.R that the issue was now squarely covered by the decision of Co-ordinate Bench of this Tribunal in the case of Shri Heerachand Kanunga for assessment years 2010-11 & 2011-12 in & 2787/Mds/2017 vide order dated 03.05.2018 wherein the issue has been restored to the file of ld. Assessing Officer with certain directions. It was a submission that on identical directions, the issue in this appeal can also be restored to the file of ld. Assessing Officer.

I have considered the rival submissions. A perusal of assessee’s case shows that it is similar to the facts in the case of Shri Heerachand Kanunga referred to supra. Consequently as we have already held in the case of Shri Heerachand Kanunga referred to supra, as follows:-

“9. A perusal of the facts in the present case admittedly given room for suspicion. However, assessments are not to be done on the basis of mere suspicion. It has to be supported by facts and the facts are unfortunately not forthcoming in the Assessment Order, in the order of the Ld.CIT(A) nor from the side of the assessee. The main foundation of the assessment in the present case is the statement of one Shri Ashok Kumar Kayan who has admitted to have provided bogus Long Term Capital Gains to his clients. The said Shri Ashok Kumar Kayan also allegedly seems to have provided the assessee’s name and PAN as one of the beneficiaries. However, this statement given by Shri Ashok Kumar Kayan cannot be the foundation for the purpose of assessment in so far as Shri Ashok Kumar Kayan has not been provided to the assessee for cross-examination. In the absence of opportunity of cross- examination, the statement remains mere information and such information cannot be foundation for assessment.

Admittedly, the assessee has claimed to have purchased 15000 shares from M/s.BPL @ Rs.20/- per share totaling into Rs.3,00,000/-. The assessee claims to have paid cash for the purchase of these shares. The primary question would be as to where the purchase was done? If the purchase has been done in Kolkata, how was the cash transferred? When did the assessee received the share certificates and the share transfer forms? How did the assessee overcome the provisions of Sec.40A(3)? Was there adequate cash availability in the books of the assessee on 24.04.2008? Did the assessee travelled to Kolkata? How was the transaction done? Who applied for the demating of the shares? When were they demated? When were the shares transferred to the demat account of the assessee? To whom were the shares sold during the Assessment Years 2010-11 & 2011-12? When were the cheques received by the assessee? From whom did the assessee received the cheques? Was there any cash deposit immediately prior to the issuing of the cheque from the bank account of the purchaser of the shares of the assessee? 11. A perusal of the Assessment Order at Para No.7.1 shows that in the Written Submissions, the assessee states that he has purchased 15000 shares of M/s.BPL from M/s.ABPL, Kolkata. However, in Para No.8.3, it is mentioned that the assessee in good faith has purchased the shares of M/s.BPL from a sub-broker in his friends circle. What is the true nature of the transaction? From whom did the assessee actually

In the result, the appeal of the assessee is partly allowed for statistical purposes.