TaxTMI 
TaxTMI 
2023 (1) TMI 1240
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....- '' Ground No.1 & 2 3.0 These grounds of appeal are with regard to making addition of Rs. 612900/- by disallowing exemption u/s 10(38) of the Act so claimed by the appellant. I have carefully gone through the assessment order as well as submission of the appellant in this regard. 3.1 During the course of assessment proceedings, on verification, it was found by the AO that the appellant had sold shares through some specified securities. The appellant had earned capital gain on the said transactions and accordingly, had claimed exemption u/s 10(38) of the act. 3.2 It was also noticed that the appellant has made transaction of the penny stock company namely M/s Blue Print Securities Ltd amounting to Rs. 612900/-. In this scheme, the shares of the penny stock companies are used by the beneficiaries of LTCG/STCL (LTCG in this case) generally through the route of preferential allotment (private placement) or off market transaction. These shares have a lock in period of 1 year as per securities and Exchange Board of India Issue of capital and disclosure requirements Regulations, 2009. Another route to acquire the shares is through Amalgamation or....
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....est of human probability. The reliance in this regard is being placed on Commissioner of Income Tax v. Durga Prasad More, (1971) 82 ITR 540 and Sumati Dayal Vs. CIT 1995 AIR 2109, 1995 SCC Suppl.(2) 453 3.6 The reliance is placed on the following judicial pronouncements:- 1. Sanjay Bimalchand Jain L/H Shantidevi Bimalchand Jain Vs PCIT (ITA No.18/2017 Bombay High Court (Nagpur Bench) The assessee had purchased shares of two penny stocks of Kolkata based companies le. 8000 shares at the rate of Rs.5.50 per share on 08.08.2003 and 4000 shares at the rate of Rs.4/-per share on 05.08.2003. The assessee sold 2200 shares at an exorbitant rate of Rs.485.55 per share on 07.06.2005 and 800 shares on 20.06.2005 at the rate of Rs.485.65. The authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs.5/-had jumped to Rs.485/-in no time. Addition confirmed 2. Chandan Gupta Vs CIT (2015) 54 taxmann.com 10 (Punjab & Haryana)/[2015] 229 Taxman 173 "Hon'ble Punjab & Haryana High Court held that where assessee could not explain receipt of alleged share transactions profits credite....
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.... by the assessee. The CIT(A) was justified in confirming the order of the AO by applying the test of human probabilities" 5. Ratnakar M Pujari VS ITO [2016-TIOL-1746-ITAT-MUM] "where Hon'ble ITAT Mumbai held that a transaction of 'off market purchase of share' for which payments were made in cash and the brokers had issued predated contract notes, is liable to be treated as bogus transaction, and hence such cash receipts are liable to be treated as unexplained cash receipts" 3.7 Hence, it is clear from the above facts, judicial decisions so discussed above and circumstances that it was a sham transaction which cannot stand the test of human probability and therefore, the addition so made by the AO is hereby confirmed and accordingly, these grounds of appeal are dismissed. 4.0 As a result, this appeal is dismissed.'' 2.2 During the course of hearing, the ld. AR of the assessee prayed that the ld. CIT(A) erred in dismissing the appeal of the assessee which should be allowed. To this effect, the ld.AR filed the following written submission. SUBMISSIONS: Ground No.1:- On perusal of the reasons recorded ....
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.... long term capital gains and the addition made by the assessing officer under section 68 of the Income Tax Act by treating the Long Term Capital Gain on sale of shares as unexplained cash credit is hereby directed to be deleted. 2. (Rajasthan High Court) DBIT No.209/2018 PCIT v. Pramod Jain Dt. of Order 24.07.2018 wherein the issue has been decided in favor of the assessee and against the department that the tribunal was justified in deletion the addition made by the AO and confirmed by CIT(A), made on account of bogus long term capital gain as the companies in which the investment was made were bogus. 3. (Delhi High Court) ITA No.125/2020 PCIT v. Smt.Krishna Devi Dt. of Order 15.01.2021 wherein it has been decided that the Ld.ITAT being the last fact finding authority, on the basis of evidence brought on record, has rightly come to the concusion that the lower tax authortieis are not able to sustain the addition without any cognet material on record, we thus find no perversity in the impugned order. In this case of the Ld.ITAT decided that "A perusal of the assessment order clearly shows that the Assessing officer was carried away by the report of the Investigati....
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....n the names of the appellants do not find place in this list also. As mentioned elsewhere the brokers of the assessee namely ISG Securities Limited and SMC Global Securities Limited are stationed at New Delhi and their names also do not find place in the list mentioned here in above in the SEBI order. There is nothing on record to show that the brokers were suspended by the SEBI nor there anything on record to show that the two brokers of the appellants mentioned here in above were involved in the alleged scam. The Assessing Officer has not even considered examining the brokers of the appellants. It is a matter of the fact that SEBI looks into irregular movements in share prices on range and warn investor against any such unusual increase in shares prices. No such warnings were issued by the SEBI. There is no dispute that the statements which were relied by the Assessing Officer were not recorded by the Assessing Officer in the assessment proceedings but they were pre-existing statements recorded by the Investigation Wing and the same cannot be the sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opin....
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....as assessed at the same figure of the loss which was declared by the said assessee, on the same date when the AO recorded the reasons that the income of the assessee escaped assessment for a sum of ? 14,00,000/- i.e. the amount received as share application money from M/s Singhal Securities Pvt. Ltd. In the present case, it cannot be said that the AO was having any material in his possession except the information received from the Investigation Wing. Therefore, the reopening was done by the AO only on the basis of the information received from Investigation Wing. In the present case also the AO in the reasons recorded mentioned that it had come to his knowledge that the persons from whom amount was received were entry operator and provided the entries to the assessee after receiving the amount in cash, however, nothing was brought on record that how and in what manner the persons from whom the assessee received the loans were entry operator and that as to how the cash was paid by the assessee. In fact the aforesaid conclusion of the A.O. is unhelpful in understanding as to whether the AO applied his mind to the material, particularly when he did not describe how and what manner it....
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....urces of income and various activities done by the assessee, datewise statement of long term capital gain on sale of shares (PB-2) having the complete datewise details of purchases and sales of shares, copies of contract notes (PB-3) in support of sales and purchases, copy of bank statement (PB-6) alongwith copy of account payee cheque (PB-4) evidencing the receipt of sales consideration of sales of shares through banking channel, complete details STT paid on sale of shares (PB-3) , party combined bill of settlement for sale of shares (PB-5) & purchase bill of shres were furnished before the Ld. AO. The Ld.AO examined the same in depth and no adverse inference was drawn by him. The assessee submitted all the documentary evidences and information in evidence of his claim which are probable and expected from a human being and proved his onus to prove. But the Ld.AO arbitrarily disallowed the claim of the assessee and made a very huge addition of Rs.6,12,900/- stating bogus LTCG claimed u/s 10(38) in the return of income held to be income from other sources without any congent evidence, inquiry, investigation or information, which is unjustified, bad in law and needs....
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....tion and thus claimed capital gain as exempted u/s 10(38) of the Act which has been treated by the AO as undisclosed income of the assessee. Conclusively the AO held that the amount of Rs.6,12,900/- introduced/credited by the assesse out of these purported share sales receipts during the year under consideration as her income from undisclosed sources and thus computed the bogus LTCG claimed u/s 10(38) of the Act. In first appeal, the ld. CIT(A) confirmed the action of the AO holding as under:- 3.7 Hence, it is clear from the above facts, judicial decisions so discussed above and circumstances that it was a sham transaction which cannot stand the test of human probability and therefore, the addition so made by the AO is hereby confirmed and accordingly, these grounds of appeal are dismissed.'' The Bench has taken into consideration the orders of the lower authorities and the decisions cited therein. The Bench noted that the issue raised by the assessee is covered by the order of ITAT Jaipur in the case of Nilesh Agarwal, HUF vs ITO (ITA No. 222-223/JP/2020 dated 9-02-2021) wherein the Bench has observed as under:- ''13. Similarly, in the instant case, the ....