TaxTMI 
TaxTMI 
2024 (11) TMI 636
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....61 (for short 'the Act') were issued and served on the assessee. In response, ld.AR of the assessee attended the proceedings from time to time and submitted relevant information as called for. 4. During assessment proceedings, the AO observed that assessee has earned capital gain amounting to Rs. 1,11,95,949/- from sale of shares of M/s. Trinity Tradelink Ltd. and M/s. CCL International Ltd.. Relevant chart of calculation of long term capital gain and short term capital gain are extracted in the assessment order. The AO observed that assessee has earned windfall gains in both the scrips within a period of short span of time. The AO analyzed both the scrip's trade and price movement from January 12 to December 14 and analyzed the financials of both the companies and observed that share prices of both the companies rose to astronomical height and the rise of shares is not commensurate with the movement of Sensex during the same period. The company has no credentials to justify sharp price rise to the market prices and not backed up with the assets and net worth of the companies. In order to verify, the assessee was to make the personal attendance before the AO and the AO has recor....
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....n submissions, which is reproduced below for the sake of brevity :- "Re: Passing of the assessment order: The assessee, for substantiating the transaction, duly submitted (a) bank statement (b) Contract notes, (c) transaction account statement with the registered broker namely M/s K.K Securities Ltd. The assessee duly complied with the notices issue and during the course of assessment proceeding and her statement was also recorded. The Ld. AO however, merely reproducing the price movement of the said scrips and placing reliance and quoting the report of the Kolkatta Investigation wing (which was not confronted to the assessee even during sending the show cause notice) and placing reliance on the statement of brokers (which were never confronted to the assessee) has chosen to make the aggregate addition of Rs. 1,20,58,450/-. From the mode and manner in which the Ld. AO has concluded the reassessment proceedings, shall make it clear that the same is merely based on surmises and conjectures, without conducting any independent inquiry, without bringing on record any evidence against the assessee, against the principles of natural justice, in violation of the settled l....
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....der section 10(38). RE: CIT (A): Against the aforesaid assessment order, the assessee filed an appeal to the CIT(A) contending the addition on merits. Beside the same, the assessee challenged the reopening as bad in law and further on the ground has erred in the law in invoking the provision of section 147 instead of section 153C of the Act since in the case, it was reopened on the basis of the information received during search and seizure operation conducted upon M/s Dutta and Tyagi other broker. The Ld. CIT(A) without considering the submissions of the appellant, without pointing out any defects in the documents submitted, confirmed the assessment or mechanical manner. From the perusal of the order of the CIT (A), it shall make it clear that in the same, the Ld. CIT (A) has passed the order on irrelevant and extraneous contentions mainly focusing on the modus operandi of the penny stock cases rather than linking the same to the facts of the present case. Against the same, the present appeal is filed before this Hon'ble Bench. RE: COMMON SUBMISSIONS OF THE APPELLANT: Now having stated the brief facts and the history of the case, in this reg....
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....cture. The assessee has got only incidental benefit of price rise. The assessee invested in shares, which gave rise to capital gains in a short period, does not mean that the transaction is bogus, as all the documents and evidences have been produced before assessing officer. The shares were sold on different dates through recognized stock exchange at quoted price. Reliance in this regard is placed on the decision of Pr. CIT vs. Sandipkumar Parsottambhai Patel [2023] 150 taxmann.com 192 (Gujarat). 3. RELIANCE PLACED ON THE ALLEGED INVESTIGATION REPORT IS BAD IN LAW/ CRYPTIC: A perusal of the assessment order clearly shows that the Assessing officer was carried away by the report of the Investigation Wing. It can be seen that the entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the assessment order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the Assessee. Even, the st....
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....ay be enough to circumstances that might create suspicion; however, the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behaviour and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Revenue. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passe....
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.... the case laws which has been enclosed by the appellant from S.no. 1 to 12 in the paper-book. In the said compilation, the appellant has placed copies of six judgements on the issue under consideration of various High Courts and six judgements of this Hon'ble Tribunal on the issue under consideration. The ratio of these case laws are as under: 7. 1 When no direct link/nexus is established of the assessee and or its broker to say that the assessee is involved in some illegitimate operation no addition can be made; 7.2 When the Ld. AO is not able to point out any deficiency/defects in the document submitted no addition can be made in its case; 7.3 All the relevant documents/statements are required to be provided to the assessee for his perusal and counter comments and in the absence of which the assessment proceedings has been initiated; 7.4 No addition can be sustained without any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators and brokers who were involved in artificial price rigging of shares; 7.5 Evidence is....
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....ancials of the company are not commensurate with the purchase and sale price in the market. The assessee has purchased the shares directly from the company and through share transfer from other party, subsequently, sold the same in the stock exchange. However, there is no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. We observe that the Hon'ble Bombay High Court in the case of Pr. CIT v. Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 date....
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....LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SC....
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....under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the....