The
decisions of the Hon’ble Calcutta High Court in the case of CIT-Vs-
Carbo Industrial Holdings Ltd (244 ITR 422) and CIT –Vs- Emerald
Commercial Ltd (250 ITR 549) are relevant to the issue where the Hon
’ble Court has held that where the payments are made by Account Payee
Cheques and the existence of the brokers is not disputed the assessee
cannot be punished for the default of the brokers and share transactions
cannot be held to be bogus. The Hon’ble ITAT, Kolkata in the case of
Rajkumar Agarwal (ITA 1330/Kol/2007 dated 10/08/07) has held that when
purchase and sale of shares were supported by proper Contract Notes,
deliveries of shares were received through demat accounts maintained
with various agencies, the shares were purchased and sold through
recognised broker and the sale considerations were received by Account
Payee Cheques, the transactions cannot be treated as bogus and the
income so disclosed was assessable as LTCG.
In
the assessment orders under consideration the AO has not considered any
of these facts. He has treated the transactions as bogus only on the
basis of the suspicion that the difference in purchase and sale price of
these shares are unusually high. It is a settled law that assessment
cannot be made on the basis of suspicion or surmise. The AO has not
brought any material on record to support his finding that there has
been collusion/connivance between the broker and the appellant for the
introduction of its unaccounted money. In view of the decisions of
Hon’ble Kolkata High Court and Hon’ble ITAT, Kolkata discussed supra,
and also respectfully following the decision of Hon’ble ITAT, Kolkata
dated 28.01 .2010 in ITA No.901 -905, Kol 2009 in the case of Sri Anil
Kr. Khemka (husband of the appellant) I hold that the AO is not
justified in treating the long term capital gain as bogus. I direct the
AO to treat the long term capital gain as claimed by the appellant and
tax them at the rates applicable for assessment years 2001 -02 to
2003-04 and for assessment year 2005-06 exemption u/s. 10(38) should be
allowed.
INCOME TAX APPELLATE TRIBUNAL, “C” BENCH, KOLKATA
Before : Shri M. Balaganesh, Accountant Member, and
Shri S.S. Viswanethra Ravi, Judicial Member
Shri S.S. Viswanethra Ravi, Judicial Member
I.T.A Nos. 714 to 718/Kol/2011 A.Ys 2001-02 to 2005-06
D.C.I.T, C.C-I, Kolkata Vs. Sunita Khemka
For the Appellant/Department: Shri Sanjit Kr. Das, JCIT,ld.DR
For the Respondent/ Assessee: Shri Manish Tiwari, FCA, ld.AR
Date of Hearing: 14-10-2015
Date of Pronouncement: 28-10-2015
ORDER
SHRI M.BALAGANESH, AM
These
appeals of the revenue arise out of the order of the Learned CITA in
Appeal No. 530/CC-I/CIT(A)/C-III/06-07 dated 21.2.2011,Appeal No.
526/CC-I/CIT(A)/C-III/06-07 dated 21.2.2011,Appeal No.
527/CC-I/CIT(A)/C-III/06-07 dated 21.2.2011,Appeal No. 53
1/CC-I/CIT(A)/C-III/06-07 dated 21.2.2011 and Appeal No.
532/CC-I/CIT(A)/C-III/06-07 dated 21.2.2011 for the Asst Years 2001-02
to 2005-06 respectively against the orders of assessment framed u/s 153A
read with section 143(3) of the Income Tax Act, 1961 (hereinafter
referred to as the ‘Act’).
2.The
only issue to be decided in these appeals are that whether the assessee
is eligible to claim long term capital gains on sale of shares during
Asst Years 2001-02 to 2004-05 at a concessional rate of 10% and
exemption u/s 10(38) for Asst Year 2005-06 in respect of sale
transactions routed through recognized stock exchange.
3.The
brief facts of this issue is that the assessee sold the shares of M/s
Emkay Consultant Ltd (Listed in Kolkata Stock Exchange) and declared
capital gains of Rs. 18,37,287/- for Asst Year 2001-02 ; sold shares of
M/s Commitment Finance Ltd (Listed in Kolkata Stock Exchange) and
declared capital gains of Rs. 19,24,910/- for Asst Year 2002-03 ; sold
shares of M/s Emkay Consultant Ltd (Listed in Kolkata Stock Exchange)
and declared capital gains of Rs. 15,67,901/- for Asst Year 2003-04 ;
sold shares of M/s Commitment Finance Ltd (Listed in Kolkata Stock
Exchange) and declared capital gains of Rs. 16,58,020/- for Asst Year
2004-05 and sold shares of M/s Limtex Investment Ltd (Listed in Kolkata
Stock Exchange) and declared capital gains of Rs. 13,16,420/- for Asst
Year 2005-06. The assessee had submitted the details of purchase and
sale of the shares in aforesaid companies before the Learned AO and
stated that the payment has been made to the stock brokers through
account payee cheque from the disclosed bank accounts. Admittedly, these
shares were held as an Investment including the other shares by the
assessee. During the course of assessment proceedings, the details of
contract notes for purchase and sale of shares were duly filed by the
assessee. The entire sale consideration for sale of these shares were
received by the assessee from the stock brokers through account payee
cheques. The assessee had also duly paid the Securities Transaction Tax
(STT) during Asst Year 2005-06 at the time of sale of shares. The
Learned AO doubted the computation of capital gains on sale of the
aforesaid shares by stating that the shares of said companies could not
have been sold at the prevailing market rates as per the Calcutta Stock
Exchange and treated the long term capital gains as bogus and held that
it is only assessee’ s own unaccounted money that had surfaced in the
form of long term capital gains with the connivance of the brokers and
accordingly brought to tax under the normal provisions of the Act
instead of concessional rate of tax applicable to long term capital
gains. On first appeal, the assessee pleaded that there was a search and
seizure operation conducted u/s 132 of the Act on Aparna Group of cases
which includes assessee herein, wherein, no incriminating materials
with regard to the subject mentioned issue before us was found by the
search party. The Learned CITA duly appreciated the contentions of the
assessee and rejected the contentions of the Learned AO in this regard
by placing reliance on the decision of this tribunal wherein addition
made towards similar grounds of share transactions in the hands of the
assessee’s husband Shri.Anil Khemka were deleted in ITA Nos. 901 to 905 /
Kol / 2009 dated 28.1.2010 for the Asst Years 2001-02 to 2005-06.
Aggrieved, the revenue is in appeal before us on the following grounds:-
Grounds of Appeal for the A. Y 2001-02
1.In
the facts and circumstances of the case and in law, the ld. CIT(A) has
erred in directing the AO to treat the long term capital gain of Rs.18,3
7,287!- earned out of selling the shares of M!s. Emkay consultants Ltd
as such as shown by the assessee and tax it as per applicable
concessional rate without proper consideration of the entire facts and
without proper appreciation of the evidences and arguments put forth in
the assessment order that the said income was nothing but assessee ’s
own unaccounted money introduced in the form of long term capital gain
with connivance of the brokers.
2.The
department craves leave to add, modify or alter any of the ground(s) of
appeal and!or adduce additional evidence at the time of hearing of the
case.
Grounds of Appeal for the A. Y 2002-03
1.In
the facts and circumstances of the case and in law, the ld. CIT(A) has
erred in directing the AO to treat the long term capital gain of
Rs.19,24,910!- earned out of selling the shares of M!s. Commitment
Finance Ltd as such as shown by the assessee and tax it as per
applicable concessional rate without proper consideration of the entire
facts and without proper appreciation of the evidences and arguments put
forth in the assessment order that the said income was nothing but
assessee ’s own unaccounted money introduced in the form of long term
capital gain with connivance of the brokers.
2.The
department craves leave to add, modify or alter any of the ground(s) of
appeal and!or adduce additional evidence at the time of hearing of the
case.
Grounds of Appeal for the A. Y 2003-04
1.In
the facts and circumstances of the case and in law, the ld. CIT(A) has
erred in directing the AO to treat the long term capital gain of
Rs.15,67,901/- earned out of selling the shares of M!s. Emkay
consultants Ltd as such as shown by the assessee and tax it as per
applicable concessional rate without proper consideration of the entire
facts and without proper appreciation of the evidences and arguments put
forth in the assessment order that the said income was nothing but
assessee ’s own unaccounted money introduced in the form of long term
capital gain with connivance of the brokers.
2.The
department craves leave to add, modify or alter any of the ground(s) of
appeal and!or adduce additional evidence at the time of hearing of the
case.
Grounds of Appeal for the A. Y 2004-05
1.
In the facts and circumstances of the case and in law, the ld. CIT(A)
has erred in directing the AO to treat the long term capital gain of
Rs.16,58,020!- earned out of selling the shares of M!s. Commitment
Finance Ltd as such as shown by the assessee and tax in as per
applicable concessional rate without proper consideration of the entire
facts and without proper appreciation of the evidences and arguments put
forth in the assessment order that the said income was nothing but
assessee ’s own unaccounted money introduced in the form of long term
capital gain with connivance of the brokers.
2.
The department craves leave to add, modify or alter any of the
ground(s) of appeal and/or adduce additional evidence at the time of
hearing of the case.
Grounds of Appeal for the A. Y 2005-06
1.In
the facts and circumstances of the case and in law, the ld. CIT(A) has
erred in directing the AO to treat the long term capital gain of
Rs.13,46,420/- earned out of selling the shares of M/s.Limtex Investment
Ltd as such as shown by the assessee and allow exemption u/s.10(38) of
the I.T Act without proper consideration of the entire facts and without
proper appreciation of the evidences and arguments put forth in the
assessment order that the said income was nothing but assessee’s own
unaccounted money introduced in the form of long term capital gain with
connivance of the brokers.
2.
The department craves leave to add, modify or alter any of the
ground(s) of appeal and/or adduce additional evidence at the time of
hearing of the case.
4.
Shri Sanjit Kr.Das, JCIT, Sr. DR argued on behalf of the revenue and
Shri.Manish Tiwari, FCA, the Learned AR argued on behalf of the
assessee.
5.
As the issues involved in all these years are identical in nature, they
are taken up together and disposed off by this common order for the
sake of convenience and brevity. 6. We have heard the Learned AR and
find that the Learned CIT (A) had relied on the decision of this
tribunal rendered in the case of husband of the assessee. The operative
portion of the Learned CIT(A) order is reproduced herein below:-
Para 6 to 6.4 of the ld. CIT(A) ’s order
“6.
I have carefully considered the submissions of the appellant and the
assessment orders. I have also carefully perused the assessment orders
in respect of Sri Anil Kr. Khemka and the order of the ITAT in the case
of Sri Anil kr. Khemka. I find that there is an uncanny resemblance
between the assessment orders passed in the case of the appellant and in
the case of Sri Anil Kr. Khemka-
(1) All those orders are passed by the same AO on the same date;
(2)
The assessment orders are identically drafted. Identical reasons have
been given by the AO and even the wordings are identical;
(3) The name of the shares on which long term capital gain has been claimed are identical in each of the assessment years;
(4) The names of the brokers through which the transactions have been made are also identical.
6.1
Hon’ble ITAT, Kolkata in its order dated 21.01.2010 (supra) in the case
of Shri Anil Khemka has made the following observation:
“Ïn
all these assessment years, the assessee has valued all the shares at
cost and offering the income of trade of these shares either as
short-term capital gains or long term capital gains as the case may be.
It is further observed that the shares at which the assessee has
purchased/sold are authenticated by the quotations of the Stock Exchange
and the transactions are routed through the bank accounts and properly
recorded in the respective companies. Keeping in view of the facts and
circumstances of the case, we find no justification in treating the said
transactions as bogus by the AO nor treating the same as business in
the nature of adventure in the nature of trade by the ld. CIT(A) is not
justifiable. Therefore, we set aside the orders of the revenue
authorities on this issue and direct the AO to treat the long term
capital gains as claimed by the assessee. Hence, the ground nos.1 and 2
raised by the assessee are allowed.”
6.2
The appellant has submitted all the original contract notes of sale and
purchase, copies of the bills, bank statements in respect of the
purchase and sale of shares. All payments were made and received through
account payee cheques drawn by the concerned Stock Brokers of Calcutta
Stock Exchange and duly recorded in the bank accounts and regular
Books-of-A/cs. All the shares sold were transferred through Demat
Account or handed over physically to concerned brokers. The price at
which the shares have been sold is also published in the daily Quotation
issued by the Calcutta Stock Exchange. The shares sold after 1st
October’04 pertains to the assessment year 2005-06. Security Transaction
tax has been deducted from the sale proceeds.
6.3
The decisions of the Hon’ble Calcutta High Court in the case of CIT-Vs-
Carbo Industrial Holdings Ltd (244 ITR 422) and CIT –Vs- Emerald
Commercial Ltd (250 ITR 549) are also relevant to the issue where the
Hon ’ble Court has held that where the payments are made by Account
Payee Cheques and the existence of the brokers is not disputed the
assessee cannot be punished for the default of the brokers and share
transactions cannot be held to be bogus. The Hon’ble ITAT, Kolkata in
the case of Rajkumar Agarwal (ITA 1330/Kol/2007 dated 1 0/08/07) has
held that when purchase and sale of shares were supported by proper
Contract Notes, deliveries of shares were received through demat
accounts maintained with various agencies, the shares were purchased and
sold through recognised broker and the sale considerations were
received by Account Payee Cheques, the transactions cannot be treated as
bogus and the income so disclosed was assessable as LTCG.
6.4
In the assessment orders under consideration the AO has not considered
any of these facts. He has treated the transactions as bogus only on the
basis of the suspicion that the difference in purchase and sale price
of these shares are unusually high. It is a settled law that assessment
cannot be made on the basis of suspicion or surmise. The AO has not
brought any material on record to support his finding that there has
been collusion/connivance between the broker and the appellant for the
introduction of its unaccounted money. In view of the decisions of
Hon’ble Kolkata High Court and Hon’ble ITAT, Kolkata discussed supra,
and also respectfully following the decision of Hon’ble ITAT, Kolkata
dated 28.01 .2010 in ITA No.901 -905, Kol 2009 in the case of Sri Anil
Kr. Khemka (husband of the appellant) I hold that the AO is not
justified in treating the long term capital gain as bogus. I direct the
AO to treat the long term capital gain as claimed by the appellant and
tax them at the rates applicable for assessment years 2001 -02 to
2003-04 and for assessment year 2005-06 exemption u/s. 10(38) should be
allowed.”
6.1
In view of the aforesaid clear findings of the Learned CITA and
respectfully following the co-ordinate bench decision of this tribunal
in the case of assessee’ s husband on the similar facts and
circumstances, we are not inclined to interfere with the order of the
Learned CITA and accordingly, the grounds raised by the revenue are
dismissed.
7.In the result, the appeals of the revenue are dismissed.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON 28 /10/2015
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