2024 (2) TMI 1337

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.... 5,97,489/- on account of sale of script of Life Line Drugs & Pharma Ltd and grossly erred in treating the same as unexplained cash credit u/s 68 of the Income Tax Act, 1961. 3. On the facts and circumstances of the case and as per law, the Ld. CIT(A) erred in confirming the addition made by the Ld Assessing Officer on account of unexplained investment u/s 69C of the Act of Rs. 17,925/- presuming it as commission paid @ 3% for arranging long term capital gain to the assessee. 4. The assessee craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be." 3. Succinct facts qua the issue are that assessee before us is an individual and during the year under consideration, earned income from house property, business and other sources. The assessee filed return of income declaring total income of Rs. 3,94,180/- on 20.09.2015, for the assessment year 2015-16. The case was selected under scrutiny through CASS under criteria "completed scrutiny" with the reason "Mismatch in sale turnover reported in audit report and ITR and suspicious sale transaction in shares and exempt long term capital gains shown in return (penny stock tab in ITS). During the assessme....

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.... acquired through banking channel. The Assessing Officer has further noted that the assessee is not a regular trader or investor in the shares. The Assessing Officer observed that the assessee has entered into above share transaction though above mentioned circular trading to take accommodation entry of bogus exempted long term capital gain. The Assessing Officer therefore held that the assessee has taken accommodation entry of bogus exempted long term capital gain of Rs. 5,97,489/- and the claim of the assessee for exempt LTCG to the tune of Rs. 5,97,489/- was rejected by the Assessing Officer and added to the total income of the assessee u/s 68 of the Act for the year under consideration on account of unexplained credit entries. 5. An addition was also made by the Assessing Officer on account of unexplained investment u/s 69C of the Act of Rs. 17,925/- (3% Rs. 5,97,489) presuming it as commission paid @ 3% for arranging long term capital gain to the assessee. 6. On appeal, ld CIT(A) confirmed the action of the Assessing Officer. The ld CIT(A) noted that in depth analyzed balance sheets and profit and loss accounts which shows that there is astronomical increase in share price o....

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....Thus this observation is again a blatant lie as no evidence in support of above contention has been cited even in the assessment order. The ld Counsel has argued that the Assessing Officer presumed that the assessee paid commission of Rs. 17,925/- out of books and proceeded to make addition of this amount u/s 69C of the Act but failed to identify any such person and even failed to put on record any evidence of movement of cash between the assessee and any person. Therefore, ld Counsel contended that both these additions made by the Assessing Officer may be deleted. 9. On the other hand, Ld. Sr.DR for the Revenue defended the order passed by NFAC/Ld. CIT(A) and he submitted that judgments relied on by the Ld. Counsel, in the case of Shri Sanjauy Kumar Patwari (HUF) (supra) does not cover the assessee's case, as entire facts of the assessee are different. The Ld. DR also pointed out that the plea of Ld. Counsel to the effect that in subsequent year, the assessee has sold some shares but the Assessing Officer did not make addition in respect of impugned scrip, is not accepted, because in subsequent year, the assessment order was framed u/s 143(1) instead of 143(3) of the Act, therefo....

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.... at prevailing price quoted on the Stock Exchange. Hence, by submitting these documents, the assessee has proved identity, creditworthiness and genuineness of the transactions. 11. We note that Hon`ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai, [2022] 142 taxmann.com 247, held that where Assessing Officer noted that assessee had indulged in scrip of shell company and had claimed long term capital gain on sale of shares and made addition under section 68 holding that entire transaction was bogus and in the nature of penny stock, however, since genuineness of investment in shares by assessee was substantiated by him by producing copy of transaction statement for period from 1-6- 2001 to 1-10-2010 and shares were retained for more than ten years and were sold after such long time, hence investment was not bogus therefore it cannot be treated that investment was made in penny stock. The findings of the Hon`ble Court is reproduced below: "2. As submitted by learned senior advocate Mr. M.R. Bhatt for M.R.Bhatt and Co., the appellant revenue proposes the following substantial questions of law, which according to the submission requires examination. ....