From time to time assessee was in touch with his CA, however, on 27.05.2018 when the assessee visited the office of the CA, he was informed that CA has expressed his inability to file the second appeal as he was not much conversant with the Tribunal matters. Thereafter, the assessee took steps and engaged different professionals and got the appeal prepared and same was filed on 01.06.2018 in support assessee has also filed his affidavit.
After considering the reasons stated in the application for condonation of delay, I find that there was no fault on the part of the assessee for not pursuing the appeal, and therefore, in the interest of natural justice, we are condoning the delay and admitting the appeal for adjudication.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeal has been filed by the Assessee against the impugned order dated 28.02.2018 passed by the Commissioner of Income Tax (Appeals), Ghaziabad for the quantum of assessment passed u/s.143(3) of the IT Act, for the Assessment Year 2014-15.
2. At the outset, the appeal of the assessee is barred by limitation by 12 days for which the assessee has filed an application for condonation of delay stating that after receiving of the order of the ld. CIT (A) on 22.03.2018, assessee has duly handed over the same to his Chartered Accountant, Shri Anil Mittal on 30.03.2015 to prepare and file the appeal before Tribunal and also paid the fees for filing. From time to time assessee was in touch with his CA, however, on 27.05.2018 when the assessee visited the office of the CA, he was informed that CA has expressed his inability to file the second appeal as he was not much conversant with the Tribunal matters. Thereafter, the assessee took steps and engaged different professionals and got the appeal prepared and same was filed on 01.06.2018 in support assessee has also filed his affidavit.
3. After considering the reasons stated in the application for condonation of delay, I find that there was no fault on the part of the assessee for not pursuing the appeal, and therefore, in the interest of natural justice, we are condoning the delay and admitting the appeal for adjudication.
4. In various grounds of appeal, the assessee has challenged the addition of Rs.30,19,500/- made u/s. 68 r.w.s. 115BBE on account of sale of equity shares.
5. The facts in brief are that assessee had declared Long Term Capital Gain on sale of shares of M/s. Jolly Plastics Industries Ltd. which was claimed as exempt u/s. 10(38). In response to the show cause notice, the assessee vide letter 27.06.2016 submitted the details of purchase and sale of scrip. However, the learned Assessing Officer issued notices u/s .133(6) to M/s. Globe Capital Marketing Ltd.; M/s. Jolly Plastic Industries Ltd.; and National Securities Depository Ltd. and noted that notice issued to M/s. Jolly Plastic returned back unserved. Thereafter, he noted the brief history of M/s. Jolly Plastic Industries Pvt. Ltd. and found that this company though was trading in plastics since 8th April, 1981, however, from last five years it was paying nil taxes. Apart from that, there were no sales made by this company in the year in which the shares were purchased. He also noted the modus operandi adopted by various entry operators for getting accommodation entry in form of penny stocks. He further noted that the share trading of the said company was suspended by the SEBI vide notice dated 1st January, 2015. Thereafter, he made a detailed discussion by relying upon various judgments and general trend adopted by various persons, and held that assessee has introduced amount of Rs.30,90,500/-, the source of which remains unexplained and are not satisfactory. Accordingly, he taxed the Long Term Capital Gain shown by the assessee @30% as provided u/s.115BBE and made addition of Rs.20,19,500/-.
6. In the first appeal, the ld. CIT( A) noted that assessee has claimed benefit and declaration made in IDS 2016 scheme for sum of Rs.10 lac towards capital gain u/s.10(38) which has been allowed by the Assessing Officer. He further observed that assessee has failed to substantiate his claim which has been allowed by the Assessing Officer and accordingly he enhanced the quantum of addition u/s.68 to Rs.30,19,500/- which was made by the Assessing Officer of Rs.20,19,500/- He also took note of the analysis and the finding given by the Assessing Officer as to how the prices of the said shares had has increased manifold which is not backed by any financial fundamentals. Apart from that, M/s. Jolly Plastic Industries Pvt. Ltd. was found to be one of the penny stock involved in manipulation of share market which is even noted by the SEBI and also the purchases of the said shares have not been made through recognized stock exchange. Thus, purchase of the shares itself was questionable and accordingly, he held that action of the Assessing Officer in taxing the said sum u/s.68 is justified.
7. Before me, learned counsel submitted that these shares were purchased through broker Limestone Properties Ltd. on 1st June, 2012 at Rs.1,34,000/- for 10,000 equity shares @ 13.37 per share. The said shares were entered into Demat account on 24.10.2013 and the sale was made on 29.10.2013. Demat account was with Globe Capital Market Ltd. which has been placed at page 10 of the paper book and from there he pointed out that both purchase and sale of the said scrip has been routed through Demat account. Thereafter, he drew our attention to pages 11 to 13 of the paper book which contains copy of bank statement wherein the amount from sale of shares have been credited on 01.11.2013 and 05.11.2013 after the shares were sold through Bombay Stock Exchange through broker, South Asian Stock Ltd. for which the contract note has been placed in the paper book at pages 14 and 15 along with transactions statement of National Securities Deposit Ltd. which is given from pages 21 to 28 of the paper book. He further pointed out to the history of movement of share price of M/s. Jolly Plastic Industries Pvt. Ltd. to show how the shares had gradually increased and had reached at a peak of Rs.317. At the time of sale, the listed price in the stock exchange was around Rs.301 to Rs.305 per share. He has given the history of daily quoted price of the said company in the Bombay Stock Exchange right from 06.12.2012 to 27.11.2014. Thereafter, he drew our attention to the list of shell companies published on 06.08.2017 and pointed out that M/s. Jolly Plastic Industries Ltd. is not appearing in such list. Further, the suspension of trading by the SEBI was done in January, 2015, i.e., much after the expiry of sixteen months from the date of the sale by the assessee. It is also not the case here this was the sole investment in shares made by the assessee. In fact assessee was a regular investor who has been investing in shares regularly. The Assessing Officer has not gathered any material or information from anywhere that assessee was any beneficiary of accommodation entry or there any statement by the broker or the broker were involved in rigging of prices in stock exchange so as to reach to a conclusion that any unaccounted money has been given by the assessee to give a colour of Long Term Capital Gain or any kind of bogus accommodation entry has been given by the broker or transaction has been managed through any entry provider. The entire observation made in the Assessing Officer and ld. CIT (A) order is based on general perception sans any information or inquiry in the case of the assessee. Thus, such an addition cannot be made u/s.68, because the nature and source of credit has been explained.
8. Lastly, in so far as the observation of the learned Assessing Officer that M/s. Jolly Plastic Industries Ltd. does not have much financial worth, he submitted that it is absolutely incorrect, as the sales/operating income for 31st March, 2013 was Rs.6750.88 lacs and as 31st March, 2014 was Rs.573.94 lacs and there was a purchase of stock-in-trade of more than Rs. 568 lacs. Thus, the contention of the learned AO that Company has no financial worth is not correct.
9. On the other hand, learned Department Representative strongly relied upon the order of the AO and ld. CIT (A) and submitted that once the trading of the said company has been banned by SEBI, it goes to show that these are penny stock companies found to be rigging the price in the stock exchange for providing such kind of an entries to the so called investors. Such kind of companies have also been reported by Kolkata Investigation Wing that the scrip of these companies have frequently used for providing accommodation entry. Thus, addition as sustained by the ld. CIT (A) needs to be confirmed.
10. After hearing the rival submissions and on perusal of the material referred to before us, I find that the assessee had purchased 10,000 equity shares of M/s. Jolly Plastic Industries Ltd. from a broker on 1st June, 2012 for Rs.1,34,000/-. Thereafter, the shares were dematerialsed on 24.10.2013 showing the purchase of 10,000 share of M/s. Jolly Plastic Industries Ltd. The said shares have been sold for Rs.30,19,500/- in the Bombay Stock Exchange through a recognized broker, South Asian Stock Ltd. who has traded the shares between 15:03 to 15:06 @ 309.10 per shares. The contract note for sale shows the transactions timing, trade number and the amount of STT paid on such shares. After the sale of shares on 29.10.2013, the amount of sale proceeds have been credited in the bank account of the assessee on 01.11.2013 and 05.112013. The bank statement clearly shows RTGS credit from South Asian Stock Ltd. These documents ostensibly go to show that the credits appearing in the bank account is from sales of shares only and the source of credit in the bank account stands well established as required under section 68. The issue raised by the learned Assessing Officer and Ld. CIT(A) are that it is an unaccounted money which has been routed sham transaction of Long Term Capital Gain because for the reasons that;
- Firstly, the trading of the shares of M/s. Jolly Plastic Ltd. was suspended by SEBI; and
- Secondly, prices of the shares of the said company were being manipulated without any financial fundamentals.
Both the authorities have quoted the general modus operandi and catena of judgment including that of Hon’ble Supreme Court in the case of Sumati Dayal Vs. CIT (1995) 214 ITR 801 and Mc. Dowell & Co. Ltd., 154 ITR 148.
11. From the perusal of the entire assessment and appellate order nowhere there is any discussion or whisper that there is any material or information with the Department that assessee’s name has appeared as a beneficiary of accommodation entry in any kind of inquiry or investigation conducted by the Department or assessee has routed his unaccounted money in the garb of Long Term Capital Gain. The entire emphasis is on the fact that there is an astronomical rise in the price of the shares in BSE. From the perusal of the historic price of shares of M/s. Jolly Plastic Industries Ltd., it is seen that the price of the said shares had been steadily growing since December, 2012 and had reached to its zenith around October, 2013 and trading in such shares was continuing uptill January, 2015. It was only in January 2015, the SEBI has suspended its trading which was much after the assessee had sold the shares. Apart from that, the copy of balance sheet of M/s. Jolly Plastic Industries Ltd. as filed by the learned counsel available in the public domain, it cannot be held that the said company did not had any operations or sales as the figures of sale as on 31st March, 2013 and as on 31st March, 2014 has already been incorporated above. If what is apparent is not real, then Department has to bring some cogent material on record to prove that assessee’s contention/explanation are incorrect or are not substantiated. Here, in this case, addition has been sought to be made u/s.68 which postulates that assessee has to prove the nature and source of credit appearing in his books of account. Here, from the perusal of the nature of credit, it is seen that the same has come through sales of shares which fact has also not been doubted by the Department. The source of money is through broker who has undertaken the transaction of the shares lying with the assessee purchased in the earlier years and same has been sold after paying due taxes in the form of STT. Thus, nature of the credit stands fully explained. If it is to be held that assessee has routed his own unaccounted money, then there has to be some material to provide live link nexus to show that the unaccounted money has been routed under the garb of transaction of purchase and sale of shares. If the availability of shares is not in doubt then the sale of the same also cannot be doubted in wake of the evidences as discussed above. Even for the sake of repetition, it is reiterated that it is not a case here that any such information or material was found or discovered that the assessee beneficiary of any accommodation entry nor there is any such statement or material either from the broker or from the stock exchange or from elsewhere. Thus, in the facts and circumstances of the case, we do not find any reason to sustain the addition made u/s.68 by the Assessing Officer and ld. CIT (A) and accordingly same is directed to be deleted.
12. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 17th January, 2019.