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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
This appeal preferred by the revenue is against the order of Ld. CIT(A)-9, Kolkata dated 31.05.2017 for AY 2014-15.
The sole issue involved in this appeal of revenue is against the action of Ld. CIT(A) in deleting the addition of Rs.74,46,250/- on account of unexplained cash credit and allow the claim u/s. 10(38) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
At the outset, the Ld. AR brought to our notice that the assessee is the mother of Kumari Tanvi Kejriwal (daughter) and Shri Viraj Kejriwal, (son). It was pointed out to us by the Ld. AR that in both son and daughter’s case, additions were made by the AO for the same reason i.e. addition of LTCG on sale of same scrips of Rs.74,46,250/- as unexplained cash credit u/s. 68 of the Act which has been deleted by the Ld. CIT(A) and the Ld. CIT(A) was pleased to allow the claim of assessee u/s. 10(38) of the Act. This action of Ld. CIT(A)
Vibha Kejriwal, AY 2014-15 has been later upheld by this Tribunal. Therefore, according to Ld. AR, on same reasons and facts, the order of the Ld. CIT(A) needs to be upheld. On the other hand, the Ld. DR could not controvert these facts.
We have heard rival submissions and gone through the facts and circumstances of the case. We note that in assessee’s son and daughter’s case also similar additions were made by AO which has been deleted by the Ld. CIT(A) and that order has been confirmed by the Tribunal vide its order dated 20.12.2017 taking into consideration the fact that the assessee got long term capital gain on sale of scrips of M/s. Kailash Auto Finance Ltd. (hereinafter referred to as ‘M/s. KAFL’). We note that during the previous year relevant to the Assessment Year 2014-15, the assessee sold 2,00,000 equity shares of Kailash Auto finance Ltd. listed on the Bombay Stock Exchange (BSE). The original investment was made by the assessee in 2,00,000 shares of M/s Careful Projects Advisory Limited on 27.02.2012 which was subsequently merged with M/s Kailash Auto finance Limited vide merger order of the Hon’ble Allahabad High Court dated 21.05.2013. Thus the shares were held by the appellant for a period of over 18 months before effecting the sale. The sale of the above shares took place on the fully automated screen based online trading system of SEBI recognized Bombay Stock Exchange on which STT was paid on each sale and therefore, the assessee claimed that the Capital Gains of Rs.74,34,775/- on sale of 2,00,000 equity shares of M/s Kailash Auto Finance Ltd. which was exempt u/s. 10(38) of the Act. The claim of assessee for LTCG on sale of scrips of M/s. KAFL was not allowed by AO which was challenged by assessee before Ld. CIT(A) who was pleased to allow the claim of assessee. We note that a similar issue arose in the case of Mahendra Kumar Baid on LTCG in respect of sale very same scrips of M/s. KAFL wherein the Tribunal held in favour of assessee by observing as under for very same AY 2014-15: “6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the ld AR that the ld AO was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. (supra) for this proposition. The various facets of the arguments of the ld AR supra, with regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated for the Vibha Kejriwal, AY 2014-15 sake of brevity. The principles laid down in various case laws relied upon by the ld AR are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Hon’ble High Court. The ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon’ble High Court in May 2013 merely based on a statement given by a third party which has not been subject to cross –examination. Moroever, it is also pertinent to note that the assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transactions of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law.
We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on the orders of the lower authorities apart from placing the copy of SEBI’s interim order supra. We find that the SEBI’s orders relied on by the ld AO and referred to him as direct evidence against the assessee did not contain the name of the assessee and/or the name of Ashika Stock Broking Ltd. through whom the assessee sold the shares of KAFL as a beneficiary to the alleged accommodation entries provided by the related entities / promoters / brokers / entry operators. In the instant case, the shares of CPAL were purchased by the assessee way back on 20.12.2011 and pursuant to merger of CPAL with KAFL, the assessee was allotted equal number of shares in KAFL, which was sold by the assessee by exiting at the most opportune moment by making good profits in roder to have a good return on his investment. We find that the assessee and / or the broker Ashita Stock Broking Ltd was not the primary allottees of shares either in CPAL or in KAFL as could be evident from the SEBI’s order. We find that the SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd’s name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI’s order heavily relied upon by the ld AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is no evidence against the assessee, much less to speak of direct evidence. The enquiry by the Investigation Wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act. We also find that the various case laws of Hon’ble Jurisdictional High Court relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the assessee.
The next common issue in the appeals is against the addition of unexplained expenditure u/s 69C of the Act on the ground that the assessee must have incurred commission expenses @ 5% of the LTCG. The Ld. AR submitted that there is no evidence of incurring such expenditure. It was pleaded that no addition u/s 69C of the Act could be made unless it is Vibha Kejriwal, AY 2014-15 found that the assessee incurred some expenditure which were not recorded in the books of accounts and the assessee failed to substantiate the source of such expenditure. 7.1. We have already held that the transactions relating to LTCG were genuine and not the accommodation entries as alleged by the ld AO. Consequently the addition u/s 69C of the Act is hereby directed to be deleted. We accordingly hold that the reframed question no. 2 raised hereinabove is decided in the negative and in favour of the assessee.”
Since the issue is same and relate to scrips of M/s. KAFL, and AY is also same, we respectfully following the order of Tribunal in Mahendra Kumar Baid, supra, uphold the order of Ld. CIT(A). Therefore, the appeal of revenue is dismissed.
In the result, appeal of revenue is dismissed.