TaxTMI 
TaxTMI 
2025 (8) TMI 622
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent proceedings had categorically admitted that she was minor at the time of investment in the scrip and thus all the investments were made by her father Shril Anil Kumar Agarwal who operated a share broking company viz M/s. Comforts Pvt Ltd, whose case such action u/s 132 of the Income Tax Act was carried out by the Mumbai Investigation Wing and during the course of search action the said Shri Anil Kumar Agarwal in his statement recorded u/s 132(4) of the Act had categorically admitted that the said scrip to be a penny stock. It was further submitted that the said Anil Kumar Agarwal also stated in detail the process, how the transactions in penny scrip take place to the stock exchange with the connivance of commission agents on nominal commission in cash in order to provide bogus and LTCG / STCG through rigging of shares. Ld. DR also challenged the order of Ld. CIT(A) by submitting that Ld. CIT(A) deleted the additions while ignoring all the vital aspects which leads to the conclusion that M/s Splash Media & Infra Ltd was a penny script and that the assessee's investments in A grade shares such as Reliance Power etc, is very low and in very small quantity as compared to the invest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing was reopened u/s 147 of the Income Tax Act, 1961 by issuing notice u/s 148 of the Income Tax Act, 1961 dated 24/03/2017 appellant vide her letter dated 27/03/2017 has requested Ld. AO to provide with reasons recorded for reopening assessment proceedings and issue of notice u/s. 148 of the Income Tax Act, 1961. 6. Ld. AO along with notice u/s 142(1) of the Income Tax Act 1961 dated 27.07.2017 has provided appellant with reason recorded for reopening of assessment proceedings, against said reasons recorded necessary objection has been filed on 12.09.2017 for reopening of the assessment proceedings, objection so raised by appellant was disposed by Ld. AO vide order dated 24.10.2017. 7. Ld. AO while completing assessment u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 vide order dated 29.12.2017, has assessed total income at Rs. 4,11,31,810/- by making addition u/s. 68 of the Income Tax Act, 1961 of Rs 4,10,19,922/- by treating total sales consideration received from the sale of shares of Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) as Income from Other Sources, without taking into considering details. documents and legal submiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter holding for more than a year at the recognized stock exchange and delivered the shares in demat form to the stock exchange clearing house and also received the sale consideration from the recognized stock exchange through the broker. 14. There is Neither reference of assessee's name in search report nor Department has proved cash trail. 15. The said statement made by Mr. Anil B Agarwal has been retracted on 15.04.2015 by way of an affidavit before notary public. There is no specific name taken in the affidavit given by Mr. Anil B Agarwal. 16. The Ld. AO did not do analysis of facts and he only relied on information, without appreciating evidences. Ld. A.O. did not apply his mind and made addition without checking figure with collaborative evidences. A. BY HON'BLE NATIONAL FACELESS APPEAL CENTRE, DELHI The Respondent had preferred appeal before CIT-A, vide Appeal No. CIT (A) 41, Mumbai/10168/2017-18and contested the additions made by the A.O. of Rs. 4,10,19,922/-. The appeal was heard by NFAC and vide order no. ITBA/NFAC/S/250/2024-25/1072439520(1)dated 22.01.2024 the appeal was allowed. The NFAC held as below, Para ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claimed on penny stocks, it was found that the assessee had also obtained such accommodation entries in the form of bogus LTCG the sale proceeds of which were Rs. 4,10,19,922/- and for availing such accommodation entries forming part of the unaccounted income of the assessee. ii. The Ld. AO on the basis of irrelevant materials and statement recorded on oath of MrAnil B Agarwal operator of M/s Splash Media wherein he has admitted of being a bogus entry provider and has provided bogus LTCG entry, the Sale consideration shown by the assessee from share transactions is treated as bogus and added as unexplained cash credit of Rs. 4,10,19,922/-. B. WHY ADDITION MADE BY A.O. IS NOT SUSTAINABLE In Assessment year i.e. A Y 2011-12 Assessee sold shares and booked the Long Term capital gain. Summary is given as under. The brief facts of transaction are as under: Name of scrip: Splash Media & Infra Ltd PURCHASE Date Name of the Script Quantity of Shares Purchase Rate Date of amount debited in Comfort Securities Limited Amount Paid to Comfort Securities Limited Chq No. 23/12/2009 Luharuka Media & Infotech Ltd. 10,000 528.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Total Shareholding 40,000 132.16 52,86,281 14-07-2010 Shares Split 10:1 4,00,000 13.22 52,86,281 SUMMARY a) The revenue relied on the findings of the Directorate of Investigation of Mumbai and Kolkata and on responses of companies who were exit providers to beneficiaries in the scrip of M/s Splash Media & Infra Ltd which established that M/s Splash Media & Infra Ltd is a mere bogus company and Anil Agarwalis the operator of the Company. b) It was noticed that these companies were engaged in issuing bogus bills for providing long term capital gain/loss, speculation loss/profit etc. It was noticed by the Ld. AO that the assessee has purchased shares of M/s Splash Media & Infra Ltd, one of the group companies of Shri Anil B Agarwal. c) On this basis the assessee's case was brought under assessment without any tangible material on record and on basis of information and statement of third party. d) The Statement of working of LTCG (Part of Paper Book Pg. No. 31) THE SUMMARY TO DETAILS, FACTS AND EXPLANATIONS IN THE CHRONOLOGICAL ORDER OF THE TRANSACTIONS OF LONGTERM CAPITAL GAIN TO ESTABLISH THE GENUINENESS ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... x. The assessee also submitted copy of DEMAT Account where the said share inwards and outwards clearly reflected in Transaction statement issued by M/s ComfortSecurities Ltd. xi. The shares were sold through recognised stock exchange on which the respondent has paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house and the seller only receives sales consideration from the stock exchange through the share broker. Therefore, neither the seller was knowing the purchasers, nor the purchasers were knowing the seller. In absence of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing. There is Neither reference of assessee's name in search report nor Department has proved cash trail. Therefore, the respondent cannot be said to be a part of the group indulging into rigging of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....angible material brought on record to convert these transactions then it is very difficult to treat the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. There was no evidence or any whisper that some unaccounted money had been routed and addition of sale proceeds needs to be deleted. xviii. The Ld. CIT(A) rightly mentions the following in the Order, "Based on the unique facts the additions made by the AO in respect of LTCG claimed by the Appellant are not substantiated with any cogent evidences. In view of the above, Ground No.-2 and 3of the appeal is hereby allowed. The sale of shares of M/s Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) is treated as genuine and exemption claimed in respect of long-term capital of Rs. 3,56,92,613/- u/s. 10(38) is allowed. Thus, the addition of the AO towards the said sale proceeds of Rs 4,10,19,922/- is hereby deleted." SHARES OF M/S SPLASH MEDIA & INFRA LTD (NOW KNOWN AS M/S LUHARUKA MEDIA & INFRA LTD.), WHEREIN TRIBUNAL HAS DELETED THE ADDITION ARE AS UNDER:- (8 Cases) SR. NO. Citation Observation 1 IN THE INCOME TAX....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he binding judicial precedents as enumerated in the order, the additions made by Ld. AO and confirmed by Ld. CIT(A), are not sustainable in the eyes of law. Therefore, we are inclined to delete the same. We order so. Consequentially, the addition of estimated commission also stands deleted. Ground Nos. 1, 3 & 4 stands allowed. No argument has been urged with respect to Ground No.2 which is related with fulfillment of requirement of provisions of Sec.153D and therefore, this ground stand dismissed. The appeal stand partly allowed. 7.1 The facts in both these years are parimateria the same. The assessment for both the year has similarly been framed u/s 143(3) r.w.s. 153A on 29/12/2017. The Long-term gains earned by the assessee on sale of scrip of SMIL have been treated as undisclosed income and added u/s 68. The Ld. AO has estimated commission of 6% in similar manner. The impugned order has confirmed the order of Ld. AO on similar logic and reasoning. Aggrieved, the assessee is in further appeal before us with identical grounds of appeal. 7.2 Facts being pari-materia the same including the fact that assessment for both the year is unabated assessment, our findings as well as a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Act towards commission paid on the accommodation entries. Since we have already decided the grounds raising legal as well as merits in favour of the assessee and consequently the addition of Rs.46,64,066/- is also ordered to be deleted as this is consequential one. Accordingly the ground No.5 is allowed. 17. Accordingly, the appeal of the assessee is allowed. 4 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC: NEW DELHI Gopal Chand Mundhra and Sons Vs. ITO, Ward-55(5), New Delhi. ITA No. 1375/Del/2019 ........ 4. The Assessing Officer recorded the following reasons for reopening of the assessment u/s 147 of the Act - "Information has been received from Investigation Wing of the Income tax Department that large scale, manipulation had been done in the market price of shares of SPLASH MEDIA by a group of persons acting as a syndicate in order to provide entries of tax exempt long term capital gains to the assessee (beneficiary). According to the information available, the assessee had traded in the above scrip to the tune of Rs.2374500/- during the financial year 2010-11 and bogus LTCG amounting to Rs.2116776 /- had been facilitated to the assessee during th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax - Tribunal upheld Commissioner (Appeal)'s decision, emphasizing assessee's right to correct mistakes and criticized Assessing Officer's reliance on statements from 'entry operators' to support additions under sections 68 and 69 as those statements were recorded in unrelated proceedings before survey on assessee, and assessee was not afforded an opportunity to challenge or cross - examine providers of those statements - On revenue's appeal, High Court confirmed order of Tribunal - Whether there was no reason to interfere with order passed by High Court and therefore, SLP was to be dismissed - Held, yes [Para 3] [In favour of assessee] 2. [2015] 54 taxmann.com 108 (Bombay) HIGH COURT OF BOMBAY Commissioner of Incometax-13 v. Shyam R. Pawar* DECEMBER 10, 2014 Section 68 of the Income-tax Act, 1961 - Cash credit (Share dealings) - Assessment years 2003-04 to 2006- 07 - Assessee declared capital gain on sale of shares of two....
X X X X Extracts X X X X
X X X X Extracts X X X X
....genuine in nature and, therefore, assesses claim was rightly allowed - Held, yes [Para 23] [In favor of assessee] 4. [2017] 77 taxmann.com 260 (Ahmedabad - Trib.) IN THE ITAT AHMEDABAD BENCH 'B' Pratik Suryakant Shah v. Income-tax Officer, Ward- 10(3), Ahmedabad* OCTOBER 21, 2016 Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long-term securities (Bogus transactions) - Assessment year 200607 - Assessee purchased 3000 shares of company 'T' through a stock broker - These shares were transferred to assesses demat account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assessee was one of beneficiary of such accommodation entries - Assessing authorities reopened assessment of assessee - Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assessee, assesses claim of exemptions of long-term capital gain on sale of shares could not be denied on basis of submissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s penny stocks capital gain: The s. 131 statement implicating the assessee is not sufficient to draw an adverse inference against the assessee when the documentary evidence in the form of contract notes, bank statements, STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error 11. Shri Sunil Prakash V/s. ACIT -15(2) I.T.A./6494/Mum/2014, Assessment Year: 2005-06 S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68 12. Pramod Kumar Lodha vs. ITO (ITAT Jaipur) S. 10(38) Bogus long-term gains from penny stocks: The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the bro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue Para 6 of the order states as follows:-The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee's account during the month of March, 2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 200910 & 2010-11 which led to investment by the assessee in that entity was also furnished during the course of assessment proceedings. Subsequently, M/s STL got merged with another entity viz. M/s SAL(Sunrise Asian Ltd.) pursuant to scheme of amalgamation u/s 391 to 394 of The Companies Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ila N Gala ITA No.1773/Mum/2010 4. CIT V/s Kan Singh Rathore ITA 192of 2014 (Rajasthan HC) 5. M/s SBD Estate Private Limited V/s. ITO 584/Mum/2015 6. Ms Farrah Marker V/s ITO ITA No.3801/Mum/2015 order dated 27/04/2016 7. Mr.ArvindAsmal Mehta V/s ITO ITA No.2799/Mum/2015 order dated 29/02/2016 8. Smt Jyoti D Shah V/s ITO ITA No.1843/Mum/2012 9. ITO V/s Deep Darshan Properties Pvt Ltd.2117 & 2118/Mum/2014 10. CIT-13 V/s ShyamR.Pawar (2015) -54 Taxmaan.com108- Bombay High Court 11. JafferaliK.Rattonsey vs DCIT ITA No.5068 Mum 2009 12. Kamla Devi S. Doshi ITA No. 1957/Mum/2015 13. Pratik Suryakant Shah (2017)-77 Taxmann.com 260 Ahemdabad Tribunal 14. Aarti Mittal (2014) 41 Taxmann.com 118(Hyderabad Tribunal) 15. CIT Appeal order in case of Umang D Soni 16. C.I.T Mumbai Vs. Mukesh RatilalMarolia Supreme Court - 2015 (9) TMI 854 - SUPREME COURT 17. The Commissioner of Income Tax-16. Vs. Mrs. Kesar A. Gada 2015 (1) TMI 1220 - BOMBAY HIGH COURT 18. Ramprasad Agarwal vs ITO2(3)(2), Mumbai[2018] 100 taxmann.com 172 (Mumbai - Trib.) 19. Shri Amar Nat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Hingora, Arif Abdul RazakHingora vs ITO Wd-I Jalna, ITA No.1875,1876,1877,1878/Pun/2018 [Pune-Tribunal] 44. CIT (A)-45, MUMBAI order in case of Parul Hemant Patel 45. Mukesh B Sharma Vs ITO 11(3)(2) ITA No.6249/Mum/2018 46. Deepak Nagar Vs The ACIT-17 ITA No. 3212/Del/2019 47. Kaushalya Agarwal Vs ITO 35(3) ITA No.194/Kol/2018 48. VijayrattanBalkrrishan Mittal Vs DCIT ITA No. 3427, 3428, 3429/Mum/2019 49. Amit Mafatlal Shah vs ACIT ITA No. 5793/MUM/2019 50. Dipesh Ramesh Vardhan and others vs DCIT CC 2(2) ITA No.7648, 7662, 7651, 7650 and 7649/MUM/2019 51. Nishant Kantilal Patel and Others vs. ITO ITA No 05,06,07 and 10/SRT/2019 52. SUPREME COURT OF INDIA Principal Commissioner of Income-tax v. Kuntala Mohapatra SLP (CIVIL) DIARY NOS. 5269 OF 2024 53. ACIT 4(1)(1), Mumbai Vs. Ankur AgrawalITA No. 5179/MUM/2024 54. ACIT vs Abhishek Rajendrakumar Mundra ITA 3929/MUM/2024 55. ASHA HIMMAT BHADRA vs DCIT CIRCLE 32(1) ITA No. 2154/MUM/2024 56. RAJENDRA KUMAR MUNDRA (HUF) vs National Faceless Assessment Centre ITA No. 1000/MUM/2024 57. VARSHABEN LAHERIKANT BHADRA v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r is working on probability which has no legs and not supported by any cogent material in his possession Suspicion howsoever may be strong cannot take place of evidence. No doubt this may lead to some kind of suspicion in the mind of the Assessing Officer but the Assessing Officer should have made proper enquiry and bring cogent material on record to support and justify his stand before making addition to the total income of the respondent. The assessment cannot be made on the basis of whims, suspicion, assumption and surmises. The addition made to the total income of the respondent has to be supported by documentary evidences Thus the learned Assessing Officer is wrong in arriving at the conclusion that the respondent has manipulated the transactions in connivance with MrAnil Agarwal and M/s Comfort Fincorp to evade the taxes on his unaccounted income. The learned Assessing Officer should have made proper enquiry and establish beyond doubt that transactions made by the respondent is nothing but accommodation entries. ii. It is submitted that the respondent has not been provided with any material on the basis of which observation is made that respondent have obtained accom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding opportunity to rebut the material relied by him during the reassessment proceedings examination which is against the principal of natural justice and hence the said order is liable to be quashed * The assessing officer did not disclose to the assessee what information had been supplied by DGIT Investigation Wing. * The assessing officer did not give any opportunity to the assesses to rebut the material furnished. * The assessing officer did not consider any materials that the assesses wanted to produce in support of the case. * The fundamental principles of natural justice have been violated. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS / JUDICIAL PRONOUNCEMENTS FOR ADDITIONS DELETED WHICH WERE MERELY BASED ON INFORMATION NOT DISCLOSED TO THE ASSESSEE IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE The Ld. AO have relied on statement made by Mr Anil B Agarwal. However, this statement has not been supplied to the respondent and hence this is in violation of fundamental rules of justice. This has also been upheld by various judicial pronouncements. Reliance is placed on following: SN Case Citation Observation/ Held....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7. KishinchandChellaram v/s CIT [1980] 4 Taxman 29 (SC)- ITO, on the basis of letters from bank manager, not shown to assessee, treated amount so remitted as income from undisclosed sources-Tribunal, relying on letters of bank manager, upheld ITO's action-Whether tribunal justified-Held, on facts, no. 8. C Vasantlal& Co. vs. CIT [1962] 45 ITR 206 (SC) It was open to an income tax officer to collect materials to facilitate assessment even by private enquiry. But if he desires to use materials so collected, the assessee must be informed of the materials and must be given an adequate opportunity of explaining it. Suspicious cannot take place the evidence 1. DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No. 6727/M/2012 dt.20/8/2014 2. K.P. Varghese v. ITO, (1981) 131 ITR 579 (SC); 3. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC); 4. CIT v. Calcutta Discount Co. Ltd.', (1973) 91 ITR 8 (SC); 5. Umacharan Shaw & Bros v. CIT', (1959) 37 ITR 271 (SC) Income assessed without evidence is bad-in-law. Income assessed by revenue without supporting material is not justified. 1. CIT V....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(Delhi) (2007). ii. Nemichand Kothari V/s CIT (136 Taxman 216) (Gau.) (2004). iii. CIT V/s Value Capital Services (P) Ltd. 307 ITR 334 (Delhi)(2008). Thus, the addition made on the basis of bad-assessment order is also bad-in-law and requires to be deleted. E. CASE LAWS RELIED BY LD. AO DISTINGUISHED 1. The Ld. AO in para 12.5pg no 28 of assessment order has laid reliance on Mc Dowell and Co. Ltd. Vs. CTO 154 ITR 148 which is distinguished as under:- SR. NO. MC DOWELL AND CO. LTD. CASE OF ASSESSEE 1. "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious method. It is obligation of every citizen to pay the taxes honestly without resorting to subterfuges." The fact remains that the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares through registered brokers by banking channel, demat statements etc., The Ld. AO's....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... noted that the AO has rejected all evidences filed by the assessee by referring to 'Modus Operandi" of persons for earning long term capital gains which is exempt from Income tax under section 10(38) of the Act. All these observations are general in nature and are applied across the board to all including the assessee. Specific evidences produced by the assessee are not controverted by the revenue authorities. No evidence collected by the AO from third parties is confronted to assessee. No opportunity of cross-examination of persons, on whose statements the revenue relies to make the addition, it provided to the assessee. The addition is made based on a general report from the investigation wing. Now the case laws relied by AO are distinguished by placing reliance on:-The Hon'ble Supreme Court in the case of Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) wherein it was held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) the Hon'ble Supreme Court held that, the onus to prove that the apparent is not real is on the party who claims it to be so. The burden of provin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case of the assessee on the basis of information received from DDIT(Inv) Kolkata to the effect that the assessee had obtained accommodation entries in the form of bogus LTCG and relied upon the statement recorded of one Mr. Anil B Agarwal, wherein he had admitted being a bogus entry provider and had provided bogus LTCG entry. 8. After analyzing the entire records, we found that during the year under consideration the assessee had sold shares and booked the LTCG and the summary of which is reproduced herein below: In Assessment year i.e. A Y 2011-12 Assessee sold shares and booked the Long Term capital gain. Summary is given as under. The brief facts of transaction are as under: PURCHASE Date Name of the Script Quantity of Shares Purchase Rate Date of amount debited in Comfort Securities Limited Amount Paid to Comfort Securities Limited Chq No. Name of Bank Account 23/12/2009 Luharuka Media & Infotech Ltd. 10,000 528.10 30.12.2009 01.01.2010 11.01.2010 16.01.2010 10,00,000 19,00,000 20,00,000 3,94,250 218786 218787 218789 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Split 10:1 4,00,000 13.22 52,86,281 9. Whereas the revenue authorities relied upon the findings of DDIT(Inv), Mumbai and Kolkata and made the additions. 10. However, the fact remains that the shares in questions were brought by the father of the assessee when the assessee was minor and at the time of purchase the father of the assessee had made payments of full consideration from assessee's bank account and the entire payment was routed through banking channel and in this regard the relevant documents have already been placed on record at paper book page No. 33. The said shares were dematerialized and credited in the assessee's father's D-mat account on the same day i.e 21.12.2009. The Company M/s Splash Media & Infra Ltd (Now known as M/s Luharuka Media & Infra Ltd.) issued bonus shares on 17.11.2009 in the ratio of 3:1 i.e against 10,000 shares the respondent received 30,000 shares totaling to 40,000 shares. Thereafter the company in the year 2010 split the shares from face value of Rs. 10 to Rs. 1 and thus the number of shares increased to 4,00,000 and same were credited in the respondents D-mat A/c. The Respondent then, through her share broker, sold the Shares ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the assessee had income from salary from two companies, whereas in reality during the year under consideration the assessee had only income from Capital Gains and other sources. It is pertinent to mention that the assessee sold the shares during the month of January 2011 to March 2011 in the F.Y. 2010-11 from a price range of Rs. 83.17/- to 117/- per share as per the price chart attached at paper book Pg. No. 31. The assessee has purchased the shares through broker from Bombay Stock Exchange and sold at Bombay Stock Exchange through its share brokers. The shares were purchased in D-mat A/c and on sale, the D-mat shares were delivered to the clearing corporation of BSE through its share broker. The AO denied the claim of long-term capital gain on sale of shares under section 10(38) of the Act and made addition of total sale consideration under section 68 of the Act. 14.Since, the shares had been in D-mat form and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced from the bank statement. Thus, possession of the shares was not in doubt at all because same was also reflected in D-mat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gains in the original assessment order and short term capital gains in the reassessment order. 16. In view of the above, the Ld.CIT(A) was justified in deleting the estimated addition of commission expenses. Accordingly, we confirm the orders passed by the Ld.CIT(A) on the three issues, viz., addition of sale value of M/s. Splash Media & Infra Ltd, and addition of commission expenses on estimated basis in the original assessment proceedings and addition of sale value of M/s. Comfort Intech Ltd., in the reassessment proceedings. In the result, both the appeals of the Revenue and the cross objection filed by the assessee are dismissed. 2 IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "A", MUMBAI Mr. Anil Agrawal (HUF) Vs DCIT-Central Circle-3(4) I.T.A. Nos.5512- 5516/Mum/2019 6.15 Finally, keeping in the facts and circumstances of the case, we are inclined to hold that impugned additions are not sustainable in the eyes of law. The assessee had discharged the primary onus of establishing the genuineness of the transactions whereas the onus as casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a & Infra Ltd. and were converted into shares and listed on the stock exchange on 29.10.2009. thereafter there was a bonus issue in the ratio of 3:1 followed by shares split in the ratio of 1:10 on 27.07.2010. Both these shares went up spirally over a short period of time According to the Revenue the said transactions are suspicious and bogus which was revealed during the course of search and seizure action on the assessee. The search team found that these two companies M/s. Comfort Intech Ltd. and M/s. Splash Media & Infra Ltd. which are listed on Bombay Stock Exchange were used for providing accommodation entries of long term capital gain/ short term capital gain. Held that: 15. Therefore, respectfully, following the decision of the coordinate bench of the Tribunal, we hold that the long term capital gain on the sale of shares of M/s. Splash Media & Infra Ltd. is not a bogus capital gain as the AO has solely relied on the report of investigation/search team and has not carried out any further verification on the basis of documents furnished by the assessee. Similarly, the position of long term capital gain earned on the sale of shares of M/s. Comfort Intech Ltd. Of Rs.1,34,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cal manner without due application of mind. Therefore, following the reasons given in the preceding paragraphs, the reassessment proceedings initiated in the case of these assessee's are also held to be not in accordance with the law and are accordingly quashed. 28. In the result, all the five appeals filed by the respective assessee's are allowed. 5 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC: NEW DELHI DamyantiMundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1721/Del/2019 6 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC: NEW DELHI Ramdev Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1722/Del/2019 7. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC: NEW DELHI Shriya Devi Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1523/Del/2019 8. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC: NEW DELHI Gopal Chand Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1524/Del/2019 16. Apart from the above reliance is also been placed on the following case laws. Sr. No. CITATION OBSERVATION 17. In the SUPREME COURT OF INDIA Principal Commissioner of Income tax v. Kuntala Mohapatra SLP (CIVIL) DIARY NOS. 5269 OF 2024 Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes [Para 7] [In favor of assessee] 19. [2014] 41 taxmann.com 118 (Hyderabad - Trib.) IN THE ITAT HYDERABAD BENCH 'A' Income-tax Officer, Ward 2, Nizamabad v. Smt. Aarti Mittal* NOVEMBER 6, 2013 Section 10(38) of the Income-tax Act, 1961 - Capital gains - Exemption of, on transfer of securities [Genuineness of transactions] - Assessment year 2006- 07 - Assessee filed its return declaring long term capital gains on shares traded in Calcutta Stock Exchange - Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assessee claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee were sham or bogus 22. Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata) ITA No.1213/Kol/2016 Assessment Year :2005-06 Bogus capital gains from penny stocks: Longterm capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault 23. CIT vs. Mukesh RatilalMarolia (Bombay High Court) INCOME TAX APPEAL NO. 456 OF 2007 7th September 2011 S. 10(38)/ 68: Long-term capital gains on sale of "penny" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity 24. Smt. Sunita Jain, V/s. Income Tax Officer, Ward10 (3), Ahmedabad ITA. Nos: 501 & 502/AHD/2016 Assessment Year: 2008- 09) The claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... penny stocks as bogus, the Dept has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of assesses action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assessee. All imp judgements referred 30. ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad) Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus 31. Meenu Goel vs. ITO (ITAT Delhi) Bogus Capital gains from penny stocks: Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assessee has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....price was in the range of Rs.489/- to Rs.491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was through clearing mechanism of the stock exchange and sale consideration was received through banking channels. The transactions are duly evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs.360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct Taxes Enquiry Committee funder the Chairmanship of Justice K.N, Wanchoo, retired Chief Justice of India) the definition of "income" in section 2(24) of the Act was amended with effect from April 61.1972 by the Finance Act, 1972 so as to include within its ambit, winnings from the lotteries, cross word puzzles, races including horse races, card games and other games of any sort or from, gambling or betting of any form or nature whatsoever. The reason underluing the said amendment was that exemption from tax that was enjoyed in respect of such winnings had provided scope for conversion of "black" money into "white" income." The apex court concluded that "There is no dispute that the amounts were received by the appellant from various race clubs on the basis of winning tickets presented by her. What is disputed is that they were really the winnings of the appellant from the races. This raises the question whether the apparent can be considered as real. As laid down by this Court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstance....