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TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 2055
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....that additions in this case were made by the AO stating that the transaction of Long-Term Capital Gain ('LTCG') is a manipulated transaction done by the assessee in connivance with the operators to evade tax on his unaccounted income and thereby, relying upon statement made by the operators treated the LTCG according to him of Rs. 89,35,535/- as unexplained income and thus, made total addition u/s. 68 of the Act. 4. Whereas, as per the facts brought on record, the assessee had purchased the shares of M/s. JMD Telefilms Limited from third party. The said company is a SEBI verified scrip and as such shares were purchased from the original purchasers. The amount for the purpose of purchase of the shares were paid by the assessee through banking channel. Ultimately, the shares were also credited in the demat account of the assessee. Thereafter, the assessee through her share broker sold the same at Bombay Stock Exchange on which Security Transaction Tax (STT) and other statutory taxes were also paid. It is well known that when the shares are sold at online platform of stock exchange, the seller of the shares does not know as to whom the shares have been sold. The shares are transferre....
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....nn.com 118 (Hyderabad - Trib.) ITAT Hyderabad Bench 'A' Income-tax Officer, Ward 2, Nizamabad v. Smt. Aarti Mittal, 06/11/2013. c. [2017] 77 taxmann.com 260 (Ahmedabad IN THE Trib.) ITAT AHMEDABAD BENCH 'B' Pratik Suryakant Shah v. Income-tax Officer, Ward-10 (3), Ahmedabad, 21/10/2016. d. ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad), ITA No. 1442/Ahd/2013 & CO No. 209/Ahd/2013. e. Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata) ITA No. 1213/Kol/2016, Assessment Year: 2005-06 f. CIT vs. Mukesh Ratilal Marolia (Bombay High Court) Income Tax Appeal No. 456 OF 2007, dated 07/09/2011. g. Smt. Sunita Jain, V/s. Income Tax Officer, Ward 10(3), Ahmedabad s ITA. Nos: 501 & 502/AHD/2016, Assessment Year: 2008-09. h. ITO-24(3)(1) V/s M/s Arvind Kumar Jain HUF ITA No. 4862/MUM/2014 Assessment Year: 2005-06. i. Kamla Devi S. Doshi V/s. The Income Tax Officer Ward 16(3)(1), ITA No. 1957/Mum/2015, Assessment Year: 2006-07. j. Shri Sunil Prakash V/s. ACIT -15(2), I.T.A. No. 6494/Mum/2014, Assessment Year: 2005-06. k. Pramod Kumar Lodha vs. ITO (ITAT Jaipur) l. Navneet Agarwal vs. ITO (ITAT Kolkata) m. ACIT vs. Vineet Sureshchandra Agarwal (ITAT A....
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....ts of the directors and entry providers etc., in the course of making the addition in the assessment order? 6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the initiating penalty u's 271(1)(c) of the Act without appreciating the fact that proceedings u/s 271(1)(c) of the Act were initiated for furnishing inaccurate particulars of income with a view to concealment of income? 7. The appellant craves leave to amend or alter any ground or add new ground which may be necessary." 2. Fact in brief is that return of income declaring total income of Rs. 1,12,522/- was filed on 28.07.2011. The return was processed u/s 143(1) of the Act. Thereafter, the case was selected for scrutiny u/s 143(3) of the Act and assessment u/s 143(3) of the Act was completed on 30.03.2014 and total income was determined at Rs. 8,10,990/-. Subsequently, the case was reopened u/s 147 of the Act by issuing of notice u/s 148 of the Act on 30.03.2017. The reassessment proceedings were completed on 19.12.2017 and AO has made total addition of Rs. 26,70,49,716/- to the total income of the assessee by treating long term capital gain earned from ....
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....bserves that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of www.taxguru.in ITA 125/2020 and connected matters Page 8 of 10 providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the questi....
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....e Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. Onsuch basis, the ITAT had returned the finding of fact against the Assessee, holding t....
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....ad held the shares much prior to 12 months of the sale of the shares." 16.3 Hon'ble Bombay High Court ITA No. 454 of 2018 in the case of Pr. CIT 31, Mumbai vs. Indravadan Jain (HUF), order dated 12.07.2023 wherein Hon'ble High Court held that:- "3. Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs. 3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs. 155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was re- opened under Section 148 of the Act. 4. The A.O. did not accept respondent....
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....sue in case of PCIT vs Ziauddin A Siddique (Income tax appeal No. 2012 of 2017 dated 4th March, 2022) and relevant discussions made by Hon'ble Bombay High Court are extracted below:- "2. We have considered the impugned order with the assistance of the 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 the 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") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. 1 but that does not help the revenue in as mu....
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.... statement of Shri Anil Khemka, alleged entry provider, which is reproduced in Assessment Order at Page 8, we note that said statement recorded neither implicate Sun & Shine Worldwide Ltd nor the broker Trade bulls Securities Pvt Ltd and nor the assessee. We note that physical delivery of shares is proved by the memorandum of transfer of shares stated in the share certificate being registered on 30.10.2012. Regarding the escalation of prices of shares of M/s Sun & Shine Worldwide Ltd., that is, the prices have increased by 140 times over the period of 17 months. At this juncture, it is submitted by ld Counsel that prices of shares are determined by the market forces and not solely on the basis of financial statements. 24. We also note that Assessing officer and CIT(A) has relied on the case of Sumati Dayal vs. CIT (214 ITR 801) (SC). We are of the view that said decision is not applicable to the assessee under consideration, as the assessee has successfully demonstrated with help of evidences on record to have made the transaction of purchase and sale of alleged shares. No single material was brought on record indicating name of any of the entry provider taking assessee's nam....
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....ition should not be made under section 68 of the Act. 26. In the light of the documents and evidences submitted by the assessee, we find that there is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that Id. DR could not controvert the facts which are supported with material evidences furnished by the assessee. We note that the allegations that the assessee/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. At the cost of repetition, we note that the assessee had furnished all relevant evidences in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the Id. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidences clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities b....
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....e High Court has held that in absence of any tangible material to show that huge cash was transferred from one side to another, addition cannot be sustained. 16.7 The decision of the Hon'ble Delhi High Court in the case of Kinetic Capital Finance Ltd wherein the Hon'ble Court held that once the initial onus is discharged by the assessee regarding the unexplained credit in the books of accounts it is for the Revenue to prove that the credit found in the books of accounts of the assessee is the undisclosed income of the assessee. 16.8 In the case of Kamdhenu Steel & Alloys Ltd 19 taxmann.com 26/206, the Hon'ble Delhi High Court held: "....once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Section 68. The AO failed to carry h....
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....ial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enable he revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions." 17 Judgements of Hon'ble Supreme Courts:- 17.1 The Honourable Supreme Court in the case of Commissioner of Income Tax-7, New Delhi (Petitioner) Vs. M/s Odeon Builders Pvt. Ltd. (Respondent), CIVIL APPEAL NOS. 9604-9605 OF 2018, judgement dated 21/08/2019 has held that: "However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initi....
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....CG"). However, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in Investigation Wing Report, addition made by Assessing Officer has been rightly deleted. 17.4 In the case of Commissioner of Income Tax vs. Discovery Estates Pvt Ltd reported in 356 ITR 0159, the Hon'ble Delhi High Court referred to the judgement of the Hon'ble Supreme Court in Lal Chand Bhagat Ambica Ram vs. CIT in 37 ITR 288 wherein the Court disapproved the practice of making additions in the assessment on mere suspicion and surmises or by taking note of the "notorious practice" prevailing in trade circles. The Hon'ble Supreme Court held: the appellant could not be tarred with the same brush as every arhatdar and grain merchant who might have been indulging in smuggling operations, without an iota of evidence in that behalf. 18. It is a trite law that the suspicion howsoever strong cannot partake the of legal evidence. The entire case of the AO is based on character presumption that the assessee has ploughed back his own unaccounted money in the pion of bogus LTCG. The AO has not given any f....
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....llant during the assessment proceedings as well as appellate proceedings, there was no justification for treating the LTCG as bogus. The Hon'ble Courts have underlined the Importance of taking cognizance of documentary evidences submitted by the appellant, independent enquiries required to be conducted by the AO, cogent material to be brought on record before taking an adverse view against the appellant and making addition u/s 68 of the Act. 21. Judgement of Hon'ble Apex Court in case of NRA Iron & Steel Pvt. Ltd. vs PCIT:- The relevant part is reproduced below:- "8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer. - Proof of Identity of the creditors: - Capacity of creditors to advance money, and - Genuineness of transaction This Court in the land mark case of Kale Khan Mohammad Hanif v. C11 and, Roshan Di Hatti v. CIT laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the ....
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....arding nature and source of credit amounts in the bank account of the Appellant by providing contract notes for purchases no sales of shares, De-mat account statement bank statements highlighting the payments for purchases and receipt as sale consideration, broker's ledger account, evidence of payments of STT Balance sheet of the Appellant showing investment made by the AO and submitted that purchases and sales of the shares were made through recognized stock Exchange i.e. BSE and the sale considerations were received from registered share Broker who in term received the credit amounts from BSE settlement system. However, having submitted these documents by the Appellant, the AO failed to undertake any further investigation/enquiry to prove that the transactions of sales of shares by the Appellant are bogus in nature. Thus, the AO grossly failed to discharge his onus and the additions were made only on the basis of doubts and suspicions. The principles laid down by the Hon'ble Supreme Court as mentioned above have not been followed up by the AO. 22. Having discussed above the analysis of the assessment order, contentions of the Appellant and legal positions in case of penny s....
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....n the assessment order were Exit-providers to the sale of shares of M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. by the Appellant. No link whatsoever between the Appellant and alleged Exit providers could be established by the A0. The AO has not shown with any shred of evidence that the unaccounted cash of Appellant was moved to the account of so-called Exit providers. The AO has neither examined any of the Exit providers nor the share Brokers of the Exit-providers. The AO even has not named who were the Share Brokers of Exit providers through which funds have flown to the Broker of Appellant. Further, the AO has not examined the bank accounts of Exit providers for its source of funds for purchase of shares from the Appellant, then how AO concluded that unaccounted money of the Appellant has ploughed back. No enquiry whatsoever was made by the AO as to how the socalled Exit-providers got the required fund to purchase the shares from the Appellant. The AO even has not examined any of the entry operators and also AO had no material to prove that any unaccounted money has been flown to the account of so-called Exit providers. The AO didn't bring any material on recor....
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....g binding decision of jurisdictional ITAT, as discussed in foregoing paragraphs, I find that the addition of Rs. 25,14,62,940/- in respect of LTCG claimed on sale of shares of M/s. JMD Telefilms Ltd. and Rs. 1,55,70.963/- in respect of LTCG claimed on sale shares of M/s Splash Media & Infra Ltd. u/s 68 of the IT Act made by the AO is unsustainable and unjustified and therefore, the said additions of LTCG made by the AO are hereby deleted and is directed the AO to accept the LTCG income shown as exempt u/s 10(38) of the Income Tax Act. Accordingly, the Appellant gets relief and thus, ground nos. 3, 4, 5 & 6 of appeal are allowed. 23. The AO has also made addition of Rs. 15,813/- in respect of LTCG from sale of shares of Adani Power, however AO has not discussed anywhere in the assessment order as to how this amount is unexplained u/s 68 of the IT Act. I don't find any reason to sustain this addition of Rs. 15,813/- u/s 68 of the IT Act. Therefore, this addition is also deleted." 4. During the course of appellate proceedings before us, the ld. Counsel has filed application under Rule 27 of the ITAT Rule, the content of the application is reproduced as under: "We refer to the af....
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.... the basis of wrong facts by saying 'yes' as in the case of the assessee, the assessment was already framed u/s 143(3) of the Act on 30.03.2014 therefore the AO has acted on the basis of incorrect facts that the assessment in the case of the assessee is proposed for the first time which is not valid. The ld. Counsel also referred clause No. 9 of the Form for recording the reasons in case the AO had shown negative remarks against the above referred column No. 8 The AO had not specified income originally assessed which substantiated the fact that AO had considered that no assessment was made earlier u/s 143(3) in the case of the assessee. The ld. Counsel also referred the copy of reasons recorded for reopening the case wherein also the assessing officer has stated that return of income for the A.Y. 2011-12 was processed u/s 143(1) of the Act on 08.09.2011 and nowhere he has mentioned that assessment in the case of the assessee was already completed u/s 143(3) of the Act. The ld. Counsel vehemently contended that the reasons recorded and information recorded in the Form for recording reasons for initiating proceedings u/s 147 and for obtaining approval was factually incorrect which es....
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....ntioned at column No. 8 of the form for reasons recorded that assessment in the case of the assessee is proposed to be made for the first time on 08.09.2011. In the said Form at column No. 8 there is specific question that "whether assessment is proposed to be made for first time if the reply is in affirmative please state." In response to said question, the AO has mentioned "yes" which is factually incorrect because in the case of the assessee assessment proceedings u/s 143(3) of the Act has already been completed on 30.04.2014 assessing total income of the assessee at Rs. 8,10,990/- under section 143(3) of the Act. Therefore, material fact in the case of the assessee show that assessment in the case has originally been completed u/s 143(3) of the Act on 30.03.2014 and the AO has formed belief for reopening of the case without application of mind and reopened assessment proceedings on factually incorrect grounds which make the assessment proceedings void. In the Forms for recording the reasons for initiating proceedings u/s 147 of the Act at Column No. 6 it is required to specify the quantum of income escaped assessment. However, without specifying the amount of income escaped, th....
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....opening notice has to be issued by assessing officer on his own satisfaction and not on borrowed satisfaction. We have also perused the decision of Hon'ble Bombay High Court in the case of Survival Technologies Pvt. Ltd., relied upon by the Ld. Counsel wherein the Hon'ble High Court held that AO to disclose as to which facts or material was not disclosed by the assessee fully and truly for the purpose of assessment of that assessment order so as to establish a vital links between the reasons and evidences. Similarly, we consider that in the case of the assessee the assessing officer has failed to establish that there was any failure on the part of the assessee to disclose fully and truly any material fact in the case before reopening of the completed assessment after the 4 years from the end of the relevant assessment year. We have also gone through the decision of Hon'ble Bombay High Court in the case of Tanhee Heights referred above wherein the Hon'ble Court held that for reopening of the assessment beyond 4 years from the end of the relevant assessment year, the assessing officer has to additionally satisfied that in a case where assessment u/s 143(3) of the Act had been complet....
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....he coordinate bench of ITAT in the case of Mahaveer Kanwarlal Ranka vs. ACIT - 28(2), IT Office, ITA No. 224/Mum/2024, dated 29.11.2024, has dealt with the same scrip and the operative portion of the decision of the same is reproduced hereinbelow: 6. We have heard the parties and perused the material available on record. The Ld. D.R. at the outset has placed on record one order dated 28.06.2019 passed by the adjudicating authority of SEBI, wherein the M/s. JMD Tele Films Industry Ltd. is also a party against whom the monetary penalty of Rs. 5,00,000/- has been levied by considering the allegations of price rigging of shares by some other persons for the period from 15.06.2009 to 02.07.2009. Admittedly there are no allegations have been levelled and even no investigation has been carried out and no penalty or restriction has been imposed against the Assessee herein. The Assessee by filing the relevant documents duly supported the transactions of purchase and sales as stated above by us. It is also a fact that purchase and sale of the transactions have been transacted through banking channel and shares were purchased and sold through Bombay Stock Exchange and the Assessee also kept....
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....he financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the 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 the 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") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL 3. Therefore, we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. 2019 (103) taxmann.com 48 (SC). but that does....