TaxTMI 
TaxTMI 
2025 (8) TMI 1500
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....tances of the case and in law, the Ld. CIT(A) failed in appreciating the fact that the company, M/s GCM Securities Limited and the brokers/other entities were involved in price manipulation in the scrip thereby confirming the investigation of the department that the scrip is utilized by entry operators for providing accommodation entries under the garb of LTCG by manipulating/rigging up the share price?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that there was huge price jump in the script of M/s GCM Securities Limited. without any economic rationale which was an arrangement for converting the unaccounted income of the beneficiaries into legitimate income under the garb of exempt LTCG without paying any taxes and assessee was one such beneficiary?" 4. "Whether on the facts and circumstances of the case and in law the Learned CIT(A) erred in ignoring the direct and circumstantial evidence brought on record by the Assessing Officer to establish that the assessee had indulged in manipulation of the share prices of M/s GCM Securities Limited with a view to record fictitious Long Term Capital Ga....
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....ny stocks script and claimed bogus LTCG on sale of penny stock." 3. Brief facts of the case are that, assessee is a HUF and its karta is a practicing Chartered Accountant since 1988. Assessee filed its return of income on 19.08.2015 reporting total income at Rs. 9,74,070/- wherein it reported long term capital gain (LTCG) of Rs. 96,49,488/- on sale of shares of listed company viz. GCM Securities Ltd. (GCM) and claimed it as exempt u/s 10(38) of the Act. This return was subjected to scrutiny assessment and was assessed at total income of Rs. 1,11,89,910/- by disallowing the claim u/s 10(38) and making addition u/s 68 towards sale consideration received on sale of shares of GCM and u/s 69C of commission @ 3% of Rs. 2,97,549/- on the said sale consideration. Ld. Assessing Officer made the said assessment based on information received from DDIT (Inv)-2, Kolkata and statements recorded of third parties. Since assessee traded in the scrip of GCM, it was alleged that assessee had brought its unaccounted money in the books of account through accommodation entry involving sale and purchase of this alleged penny scrip. 3.1. Assessee applied for private placement of 24,000 equity shares....
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....ssessee had failed to discharge his onus to prove the unusual rise and fall of share prices. Ld. Assessing Officer placed heavy reliance on the doctrine of preponderance of human probability to hold that the assessee is indulged in bogus and dubious share transactions since he had not been able to adduce cogent evidences in this regard. 4.2. It is worth noting that before drawing adverse conclusion, ld. Assessing Officer deliberated on the general modus operandi of such transactions as well as background of the investigation carried out by the wing, without pinpointing anything specific towards assessee, in this regard. 4.3. Ld. Assessing Officer, thus completed the assessment by making an addition u/s 68 of the Act towards entire sale consideration of Rs. 99,18,288/- received by the assessee on the transaction of sale of shares in the aforesaid scrip and u/s 69C of commission @ 3% of Rs. 2,97,549/- for arranging the said transaction. Aggrieved, assessee went in appeal before the ld. CIT(A), who after detailed examination and deliberation of facts and jurisprudence, deleted the same. 5. Before us, ld. Counsel for the assessee has reiterated the submissions made before the ....
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....copy, DMAT statement and bank statement. v. transactions were made through banking channel. vi. No cross-examination opportunity afforded for material and statement relied upon by the ld. Assessing Officer based on information supplied by the Investigation Wing violating the principles of natural justice. vii. No adverse finding by SEBI on the trading in GCM scrip, thus, doubts and apprehensions raised by the ld. Assessing Officer does not hold ground. 6. In the course of hearing, ld. DR had placed reliance on the order of ld. Assessing Officer and referred to adjudication orders passed by SEBI and asserted that the share transactions undertaken by the assessee are of tainted scrip which were investigated and subjected to penalties. 7. We note that transactions were undertaken through the SEBI registered broker Motilal Oswal on the stock exchange platform on which STT was levied and the consideration was routed through normal banking channel. The entire flow of these transactions is corroborated by relevant documentary evidences placed on record. While making the addition, there are no discrepancies pointed out by the Assessing Officer in the docume....
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....d out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transaction cannot be sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging. 8. We have perused the order of ld. CIT(A) to note point wise elaborate exposition on each of the aspect alleged by ld. Assessing Officer. Ld. CIT(A) has dealt with both, fact and jurisprudence relating to the transaction undertaken by the assessee in his 48 points detailing. The same is extracted below for ready reference: "3. STATEMENTS OF FACTS:- 1. The appellant had filed Return of Income on 19.08 2015 declaring Total Income of Rs 9,74,070/- 2. During the year the appellant had earned Long Term Capital Gain of Rs 96-49- 406-0 Sale of shares of GCM Securities Ltd., which was claimed as exempt income uls. 10(38) of IT Act, 1961 in the return of income filed. 3. The transaction trail of above mentioned LTCG is refle....
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..... It seems that the assessee HUF applied for 24,000 Equity shares in the Private placement of NSE broker, GCM Securities Limited on payment of Rs. 4,80,000/- on 09/02/2014, relevant to Assessment Year2014-15 3. IPO of the company hit the market was in March 2014, it was oversubscribed by about 2.45 times. 4. The shares were issued directly in the normal DMAT account of the assessee HUF. 5. The assessee sold shares in 4 tranches on the BSE platform through M/s Motilal Oswal Securities Limited and has duly paid STT on the same. The details of sale of shares were as follows: Date Of Sale Quantity Of Shares Sold Net Rate (Rs.) Amount (Rs.) 16/09/2014 5,600 (Face Value of Rs. 10) 691.26 38,71,048 27/112014 19,200 (Face Value of Rs. 1) 85.96 16,50.336 16/12/2014 11,200 (Face Value of Rs. 1) 85.66 9,59,340 21/01/2015 48,000 (Face Value of Rs. 1) 71.32 34,23,197 Total 99,03,921 6. The assessee claimed the profit arising from the above sale of shares Term capital gain u/s 10 (38) in the Return of income filed on 19/08/2015 7. The said return was selected for com....
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....) Dated 20/02/2024), the assessee has filed a detailed reply vide letter dated 19/02/2024 along with several attachments. The reply to this appeal has been filed by the assessee in three parts and its Income Tax E-proceedings Response Acknowledgment Numbers are (i) 117119521190224, (ii) 116862441190224, and (iii) 116836611190224. The same has been verified and the said order has been passed after evaluating the same. 15. The assessee has submitted a detailed submission spread over 143 pages along with 51 attachments vide the above mentioned E-proceedings Response Acknowledgment Numbers. 16. The assessee has explained the (i) facts of the case in detailed with relevant documents, (ii) Observations and Remarks on Assessment Order, (iii) Observations and Remarks on Investigation Report of DIT (Inv), Kolkata, (iv) Appeal Submissions and (v) Judgements relied upon by the assessee. 17 Facts of the case as submitted by assessee is summarised as follows (a) The assessee came to know about NSE Member GCM Securities Ltd. He did some research about the same and came to know that this Financial Sector NSE member Company has all Chartered Accountant Promotors....
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.... assessee's case. There is not even a reference of assessee even once in these statements (n) The assessee, in his submissions, has pointed out various defects/mistakes/wrong observations etc by the assessing officer in his submissions, specifically in point No 29 (ranging from page no.-9 to page no.-85) of its submission dated 19th February 2024, about observations of the Assessee about the short comings of the Assessment Order. Few of them are summarized as follows: • The assessing officer has not found any defects in any details or documents submitted during the assessment proceedings before summarily rejecting them in totality. • The assessing officer has stated that the details are test checked despite details in very small volume of papers. • The entire order is totally based on the report by Dhruva Purari Singh, DDIT (Inv). Unit 2 (3), Kolkata, which is a general study report and not a conclusion or conclusive finding in particular for any assessee. As against this, the assessing officer has treated the same as the Conclusive report against the assessee. • The assessment order has different names of So-called o....
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....h name to use as Entry/Exit provider and Operator in the present case. • The assessing officer is also stated that the assessee has purchased the shares of Jackson investment Ltd, is also not correct as the assessee does not have anything to do with the said company. • What Assessee did was an act of prudence, which any financial savvy investor will do To profit in rising market, to encash partial profit in the falling market and to hold certain shares for another long term appreciation is not wrong by any means. This simple financial logic was not understood by the assessing officer. • There is no cash trail identified or proved by the assessing officer at all in the present case. There is no evidence of anyone receiving cash for sale proceeds being received by the assessee There is no evidence of assessee paying cash to anyone for the same either • The assessee being a beneficiary of the Bogus | TCG scam is only a suspicion which has not been proved at all by the assessing officer at all. • The said report of DDIT, Kolkata, was also not given to assessee for any explanation thereon but simply used as conclusive evid....
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....n opportunity given to the assessee. These statements nowhere have the name of the assessee, or any evidence of any cash paid by the assessee for purchasing so-called capital gain. Furthermore these statements nowhere has any evidence of any cash received from assessee by anyone towards these so-called capital gain or even otherwise. 23. The detailed affidavit filed by the assessee in reply to the show cause notice also has been accepted by the assessing officer with full contents thereof as assessing officer has not pointed out any defects therein or stated so in his assessment order. 24. There is no BSE or SEBI enquiry even initiated as regards GCM securities Limited is concerned as certified by the said company in its letter to the assessee. The said letter was written by the company in response to assessee's letter followed by another reminder. There is nothing contrary to the same in the Public Domain. 25. It is submitted that not even 1 defect in any / all the evidences filed by the assessee for claiming long term capital gain as exempt U/s 10 (38) is pointed out by the assessing officer before summarily rejecting the exemption u/s 10 (38). ....
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...., rate, timestamp, value, taxes and charges, STT, brokerage, SEBI and exchange turnover charges, service tax and stamp duty incurred on the transactions done on BSE platform which is recognized by the market regulator SEBI. The documents have been accepted by the assessing officer (b) Bank statement showing the sale proceeds credited by Motilal Oswal Securities Ltd. DMAT account of the assessee showing HUF has sold the shares and transferred the same to broker is also filed, these are also not doubled by the assessing officer (c) The sale consideration received by assessee, from Motilal Oswal securities Ltd, registered broker of SEBIBSE as per contract note, directly in the bank account after shares are delivered from DMAT account and received by the assessee. This explains the identity of the creditor and source of money paid to assessee for genuine transaction of sale of shares. (d) shares are sold by assessee broker on BSE platform and not off market to any buyer. Hence the sale is on BSE clearing system and not to any random person. The transaction is also at the prevailing market rate on the public domain which prove the genuineness of the transaction. (e) In the absence of SE....
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....unts but also of internal controls and systems of their members and for the smallest violation it levies heavy penalty. It is stated that the said companies name does not appear on Prima Facie, research on public domain for any such violation. The said company was there were issued any notice for price rigging or any such serious wrongdoing/fraud/scam. 39. In nutshell the assessing officer has no evidence whatsoever against the assessee to prove their allegations AND at the same time, the assessee has produced all possible relevant proofs to claim the exemption U/s 10 (38) including even all 3rd party documents are also verifiable if needed. At the time of assessment order or during the assessment proceedings, the assessing officer has not found any defect whatsoever in any of the documents or submissions submitted by the assessee. 40. It is also observed from the statements recorded by DIT (Inv), Kolkata and provided to the assessee by the assessing officer that there is nothing which brings out any evidence or any information to confirm the suspicion to reach its logical and with a view to nail assessee for any wrongdoing. There is simply no evidence in the pres....
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.... officer, has simply failed to connect the dots and there are no evidences for making any addition. The assessing officer has also not found any defects in the documents submitted by the assessee. 46. The documents submitted by the assessee are largely sufficient to prove the genuineness of allotment of shares by the company and the subsequent sale thereof, mother words the entire transaction 47 The documents submitted by the assessee are: • share application form dated 9 February 2013 • the bank statement highlighting payment made to company • share allotment letter from company dated 13 February 2013 • Motilal Oswal securities Ltd website "forthcoming IPO" page • IPO prospectus extracts • press release for public issue-newspaper cutting • Demat statement showing credit of shares • 4 sales invoices of Motilal Oswal securities Ltd • Ledger confirmation of Motilal Oswal securities Ltd • bank statement • affidavit on solemn affirmation that assessee has not given any cash or any amount to ultimate buyer or brokers in lieu of ....
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....com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon'ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon'ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 10. We also find force of binding nature from the decisions of Hon'ble High Court of Bombay being a jurisdictional High Court: i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held as under:- "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sou....
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....eld: "Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68" 11. Further, revenue in its ground of appeal has contended that issue is a covered matter by the decision in the case of Swati Bajaj & others v. PCIT [2022] 446 ITR 56 (Cal). In the said decision, it was held that assessee had to establish the genuineness of rise in price of shares within a short period of time that too, when general market trend was recessive. However, we note that there are several decisions of Hon'ble Jurisdictional High Court as stated supra which are in favour of the assessee. Accordingly, the same would prevail on the issue before this Tribunal. In the present case, decision of the Hon'ble Non-Jurisdictional High Court carries only a persuasive value. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value....