TaxTMI 
TaxTMI 
2025 (2) TMI 760
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....hich are linked and interrelated. 3. In the ground no.1, it has contested the action taken by the Revenue u/s 147 of the Act, by claiming that the proceedings were initiated only on the basis of information from Investigation wing. However, in the course of appeal before us, the learned Counsel has not pressed the ground which accordingly is dismissed. 4. Ground nos. 2 and 3 relate to addition of LTCG on sale of shares claimed exempt u/s 10(38) of the Act as unexplained credit u/s 68 of the Act. It is stated to be wrong and contrary to the provisions of the Act. 4.1 Without prejudice, it is claimed that assessee's case is squarely covered by the judgement of the co-ordinate bench in the case of his own brother's HUF and niece where on similar facts, the hon'ble Mumbai Bench has deleted the addition made on account of bogus LTCG u/s 68 of the Act. 5. The ground no.4 pertains to penalty proceedings initiated u/s 271(1) (c) of the Act. It is premature ground as no penalty order was passed. Accordingly, the ground stands dismissed. 6. Since ground no. 2 and 3are the only substantive grounds, they are being adjudicated here under. 7. Facts in brief are that the assesse....
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....ce rigging of penny stock by way of off market or preferential allotments with a holding period of one year and ultimately resulting in long term capital gains or loss. Above mentioned shares were also traded in connivance with such players and the income was disclosed in pre-arranged manner. Detailed analysis of transactions of above penny stock is narrated in the assessment orders as to how these companies with no net worth got their prices rigged. Moreover, certain operators in their deposed statements admitted of having bought similar bogus long term capital gains on payment of certain percentage of commission. Similar admission was also made by some other operators also. The AO has observed that the above transactions were non genuine and prices of scrips were rigged and are raised through circular trading. The assessee failed to state any satisfactory reply to justify the logic behind genuine purchase of the above shares vis-a vis failed to justify the genuineness of sudden increase and decrease of the prices of the shares. He accordingly, held that these transactions were structured in connivance of various players only for the purposes of tax evasion and give a legitimate c....
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....of satisfactory explanation on the part of the appellant. Accordingly, he concurred with the conclusion drawn by the AO that the alleged LTCG for sale of preference shares as bogus and was not eligible to exemption u/s 10(38) of the I.T Act and the addition by invoking provision of section 68 of the I.T Act was confirmed. However, he deleted the estimated addition on account of commission as unexplained expenditure by observing that the AO was unable either to establish any basis of estimation how he estimated the said 2% commission and not 0.2% or 20% commission of unexplained expenditure for the said transaction or the AO was unable to bring any cogent materials of 2% expenditure incurred by the appellant before invoking provision of section 69C of the I.T Act. Accordingly, the estimated addition made by the AO was deleted. 9. In the course of hearing of the appeal before us, the ld. DR has relied on the order of authorities below. 10. Per contra, the ld.Counsel of the assessee has vehemently opposed the appellate order by way of written and oral submissions. It is submitted that during AY 2015-16 the assessee had sold the listed shares of Pine Animation Ltd and PSIT Infra ....
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....is submitted that the assessee, in order to justify the genuineness of purchase and sale of shares, furnished the understated document on record :- a) Copy of allotment of share and receipt of purchase money and share transfer forms thereof. b) Copy of Bank statement evidencing of having payment made; c) Copy of D-mat statement. d) Copy of contract-cum-bills in support of sale of shares made on floor of Bombay Stock Exchange; e) Copy of Bank statements highlighting the receipt of sale consideration from the stock broker by RTGS; 10.4 The assessee submitted that by providing all the necessary documents/evidence he has thoroughly discharged his onus, such as contract notes, bills, bank statements, D-mat statement, Share certificate, etc to prove the genuineness of purchase and sale of shares and earning of Long term gain thereon. Entire sale of shares had been made on floor of Bombay Stock Exchange on which legitimate STT had been paid. From the evidence submitted the Ld. AO could not point out any defect in such documentary evidences filed on record. Even he had not rejected the assessee's books of accounts u/s.145(3) of the Act. B....
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....uld not disprove the genuineness of transactions, as under:- a) CIT vs. SmtJamnadevi Agrawal-20 Taxmann.com 529 (Bom-HC) b) Mukesh R Marolia-88 CCH 27 (SC) c)Shri Yogesh P. Thakkar v. DCIT-ITA-1605/M/2021 dated 03/02/2023 d) Shri Bhikamchand Mutha v. IΙΤΟ - ΙΤΑ - 2562/M/2022 dated 30/01/2023 10.7 It is contented that the Ld. AO doubted the genuineness of sale transaction of shares by holding that the price of shares had substantially increased in short period of time and such is not in consonance to its financial results. In this context, assessee submits that he had sold the shares on floor of recognised exchange i.e BSE at the prices prevailing at relevant point of time. The contract-cum-bills and rate publication of BSE discloses the prices at which the shares are sold by the assessee on floor of BSE. To prove genuineness of transactions the assessee furnished copies of contract-cum-sale bills, D-mat statement, bank statements etc during the course of assessment proceedings and the correctness of such documents had not been doubted by the AO. On the transaction of sale the assessee had made the payment of Ser....
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....d to the assessee and accordingly would not hold any adverse bearing on the assessee. On this premise the assessee relies on judicial decisions of Hon'ble Apex Court and High Courts, wherein it is held that statements of 3rd parties cannot be held as admissible evidence unless copies are provided and opportunity of cross examination is provided to the suffering party, as under :- a) Andaman Timber Industries v. Comm. of Central Excise - Civil Appeal No.4288/2006), b) CIT v. Sunita Dhadda-ITA-197/2012 (SC), c) KishandchandChellaram vs. CIT-125 ITR 713 (SC), d) Sunil Aggarwal-64 taxmann.com 107 (Del-HC) 10.10 It is submitted that the Ld. AO alleged that undisclosed cash belonging to the assessee is received back in garb of long term capital gain. In this context, the assessee submits that heavy onus is cast upon the person who asserts the allegations. The Ld. AO, except making bare allegations, had not discharged the heavy onus cast upon him and had not brought an iota of evidence on record to justify the allegations, thus the addition made on the basis of assumption and surmise is unjustified. The Hon'ble Apex Court in the case of Lalch....
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....n (Brother's Wife) 2014-15 1922/MUM/2023 wherein on identical facts the Hon'ble Mumbai ITAT allowed the appeals of the assessee in toto by treating the LTCG earned in the scrip M/s Pine Animation which was purchased off market as genuine and also allowed exemption claimed u/s 10(38) of the IT Act 1961 and directed the Ld AO to delete the addition made. Since the issue is covered by the decision of Hon'ble Jurisdictional ITAT in assessee's family members case, it is requested to the AO may be directed to follow the ratio of the higher authority judgement and oblige. 10.14 Therefore, in view of the above the facts and circumstances of the case, the assessee submitted that the decisions of the jurisdictional Hon'ble High Court and co-ordinate Bench cited above and judgements of Hon'ble Coordinate benches in case of assessee's own family members shall apply to the assessee's case since the Ld AO could neither establish its involvement in price rigging nor found any fault with the documents furnished by the assessee. The AO has passed stereo type order which he has done in other cases without bringing on record any similarity. Thus, it is requ....
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.... the investment in such shares in balance sheets of earlier years and such share investments had been accepted as genuine in earlier years. In support of assessee's contention, he relies on direct judicial decisions of Hon'ble Jurisdictional High Court and Hon'ble ITAT, wherein it is decided that off-market purchase of shares is not an illegal activity and would not disprove the genuineness of transactions. 11. We have duly considered the facts of the case, the contents of the assessment order, detailed submissions of the assessee as also various case laws. We also find that the co-ordinate benches of ITAT, Mumbai have in several cases considered similar cases of addition of LTCG arising out of Investigation wing Kolkata report in such shares. Very recently, in some of such cases, the Bench presided by the Hon'ble President, ITAT has considered such issues in a series of decisions and has given a categorical finding that such additions were not based on sound footing and were deleted. It appears on perusal of the orders that even the LTCG issue related to the same scrip as in the present case. In one such case of ITA No.2443/MUM/2023(Departmental appeal) in the case ....
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....artered Accountant by profession. The AO has also recorded statement from her husband, but did not find any adverse feature in the statements given by both the parties. We also notice that - a) the assessee has purchased these shares by paying consideration through banking channels. b) the shares of M/s. Pine Animation Ltd., have been purchased from an existing share holder in the off market. The copy of physical share certificate is given, wherein the name of the assessee has been to have been endorsed. c) the shares have been later dematerialised and kept in the Demat account. d) the assessee has sold the shares through stock exchange platform e) the assessee has received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group, which involved in the manipulation of prices of shares. Hence, there is no r....
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....mar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt. Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus- operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner obse....
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.... of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substan....
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....ed. Under these set of facts, the Hon'ble Bombay High Court held as under:- "....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange.. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Dematinstruction slips and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dismissi....
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....er years were accepted as genuine. Shares were traded on online platform of the Stock Exchange. Therefore, sale transactions could not be doubted. 13. In another case of Alka Dilip Doshi in ITA No.1837/Mum/2023 dated 20.02.2024 the assessee sold shares of Sunrise Asian Ltd. The tribunal has taken note of various decisions of Ahmedabad Bench of ITAT in several cases as per para 14 of the order where investment in shares of Sunrise Asian Ltd was held to be without any doubt. Accordingly, based on decisions as reproduced in other cases referred above, the LTCG was held to be genuine and the addition u/s 68 was deleted. 14. In another case of Manju Hiralal Baina in ITA No. 1026/Mum/2020 dated 15.4.2024, the same bench presided by the hon'ble President has considered similar issue at length and deleted similar addition u/s 68 of the Act. 15. Reference could also be made of the decision in the case of Shailesh Jain HUF in ITA No.6068/M/2019 dated 16.02.2021 in which similar issue was involved w.r.t. shares of Four K. Animation Ltd. The co-ordinate bench of Mumbai in a detailed judgement has considered all relevant aspects of the case and deleted similar addition made u/s 68 of t....
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....uspicion how so far strong could not take the character of legal evidence. Thus, it was noted that none of the parties alleged by the Revenue such as broker, operator, directors, exit providers etc whose statements were recorded by the Directorate of Investigation, Kolkata stated name of the appellant. The case of the assessee is supported by a catena of decisions as in the cases of Kunal Dedhia in ITA No.3893/M/2019 dated 31.07.2020, Vijayarattan Balkrishhna Mitta in ITA No.3429/M/2019 dated 1.10.2019, Mukesh Sharma in ITA no.6249/M/2018 dated 29.05.2019 etc. 16. Considering the above discussion, the facts on record and the legal position emerging out of catena of decisions of Hon'ble Supreme Court, jurisdictional High Court and direct decisions rendered by the co-ordinate benches of Mumbai, ITAT order, we hold that the addition made by the AO u/s 68 of the Act in both the years under consideration are devoid of any merit. The claim of the assessee u/s 10(38) of the Act has been made based on facts which could not be rebutted by the AO. The documentary evidences could not be rejected without bringing on record any substantial piece of evidence and just on the basis of certain i....