TaxTMI 
TaxTMI 
2025 (2) TMI 760
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....ound 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 assessee derived income from Partnership firm, House property, Oth....
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....l 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 colour to the transaction. Various players including brokers, ....
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....dingly, 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 Ltd on floor of Bombay Stock Exchange and claimed long term Capital....
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....tatement 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. By not doing so the Ld. AO has not discharged the heavy onus cast upon him and had not brought on record any cogent material/evidence to disprove the transaction. 10.5 In support of its contention that before treating genuine gain as ingenuine the Ld. AO is duty bound to bring on record any evidence....
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....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 Service tax, STT and other charges to the broker and in turn to exchequer. On verification/perusal of these evidences the Ld AO had not brought on record an iota of contrary evidence to prove that the assessee was involved in alleged rigging of share prices. On this context assessee relies on direct judicial decisions of Hon'ble Ju....
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....g 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 Lalchand Bhagat Ambica Ram v. CIT (37 ITR 288) and in the case of Omar Sahay Mohamad Sait v. CIT (37 ITR 151) had decided that it is a trite law that additions cannot be made on the basis of suspicion, surmise, conjectures and in absence of evidence. Also, Hon'ble Apex Court in the case of Umacharan Shaw & Bros. (37 ITR 271) had decided that suspicion, however strong, cannot take the place of a....
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.... 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 requested to direct the Ld AO to delete the addition made and oblige. 10.15 With regard to Radford and Sunrise shares, it is stated is submitted that the assessee, in order to justify the genuineness of purchase and sale of shares, furnished the understated document, Copy of application for preferential allotment and allotment advice from the company allotting 100000 shares of Radford Global and proof of purchase of shares of Sunrise Ltd, Copy of Bank statement evidencing of having payment made, Copy of D-mat statemen....
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....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 of ITO Ward-23(2)(6)Mumbai Vs. Manisha NarpatkumarChopra. Relevant paras are reproduced as below for ready reference: "11. We heard rival contentions and perused the record. We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkata in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation Wing, Kolkata is a generalized r....
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....rialised 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 reason to suspect the purchase and sale of shares undertaken by the assessee. 13. Both the parties relied on various case laws before us. We may refer to the some of the decisions rendered by Hon'ble jurisdictional Bombay High Court. In the case of Shyam Pawar (54 taxmann.com 108) (Bom), the Hon'ble Bombay High Court has observed as under:- "3. Mr. Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of ....
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....ealed 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 observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr. Gopal's contentions are well founded. The Tribunal concluded that there was something more which was requi....
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....alings, 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 substantial question of law." 14. In the case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No. 2012 of 2017 dated 4th March, 2022), the Hon'ble Bombay High Court has observed as under:- "2. We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT")....
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....tract 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 dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal." 16. ....................................................... In the earlier paragraphs, we have followed the binding decision rendered by Hon'ble Bombay High Court. Hence, the Ld.DR cannot place reliance on the decision rendered by Hon'ble Kolkata High Court in the case of Swati Bajaj (supra). Accordingly, we are of....
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....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 the Act. The bench has taken due note of the fact that the company was a listed company on Stock Exchange, subjected to various rules and regulations and compliance which have to be complied with under preferential allotment process. The assessee had filed all the relevant documents in support of the investment, transaction taking place through registered stock brokers. The investigation report of Kolkata, nowhere name of the assessee figured nor evidences were found during the search and the entire allegations were based on surmises and conjectures only. Moreover, authorities below failed to establish any money trail involved in the transaction and has only guessed that the assessee might have paid his own money....
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.... 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 individuals who also were not produced for cross examination of their stated stands. Moreover, the jurisdictional High Court decisions cited supra are on identical facts as also the co-ordinate benches of Mumbai tribunal have a binding precedence. None of them could be distinguished by the ld.CIT(A) anywhere in the appellate order. Apparently, the order has in a preconceived manner dittoed the assessment order rather than by way of independent application of mind. We have no hesitation in deleting the additions. The AO is therefore, directed to delete the additions made u/s 68 of the Act in both the AYs 2014-15 and 2016-17. 17. In the result, both the above appeals of the assessee are partly allowed. ITA No.257/MUM/2024(R....