TaxTMI 
TaxTMI 
2025 (10) TMI 1012
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....erally relied upon the statements given by some Vipul Bhatt or Anil Khemkaand nowhere learned AO could prove that assessee was part of the modus operandi or he was in any way connected to Vipul Bhatt or Anil Khemka to any other entity involved in this racket. Even Appellant's request for cross examination of Vipul Bhatt was also grossly rejected thereby depriving appellant of natural justice. Further addition is made u/s. 68 whereas Appellant has duly explained the whole capital gain and therefore the question of unexplained cash credit does not a rise at all. Hence addition of Rs. 68,98,020/- deserves to be deleted." 2. The assessee is an individual and filed the return of income for AY 2014-15 on 30.09.2024 declaring total income of Rs. 40,15,350/-. The case was reopened by issue of notice under section 148 of the Act for the reason that the assessee has sold share of alleged penny stock M/s Sunrise Asian Ltd. to the tune of Rs. 68,98,020/-. The assessee submitted various details before the Assessing officer (AO) with regard to the sale of shares. The AO after perusing the details held the impugned transaction as non-genuine and accordingly added the entire capital gain as....
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....Sunrise Asian Ltd. 5.3. The investigation concluded that the transactions were not genuine investments but rather a series of pre-arranged, circular steps designed to convert unaccounted cash into tax-exempt capital gains. Evidence showed that the trading in these shares was devoid of bona fide commercial intent and was, instead, orchestrated to evade taxes. The purchase and sale were not influenced by natural market forces but by artificial manipulation among the parties involved. The failure of the assessee to explain the extraordinary fluctuation in share prices or to demonstrate any knowledge of the companies' fundamentals further supported the conclusion that the transactions lacked legitimacy.Additional findings of the assessing officer indicated that the net worth and business activities of these penny stock companies were negligible. 5.4. After analyzing the findings of the investigation and the enquiries made, the assessing officer concluded that the evidence demonstrated that the transactions entered into by the appellant were artificial, lacking commercial substance, and structured solely for the purpose of tax evasion. The elaborate scheme, involvi....
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..... 4. The ld. DR on the other hand vehemently argued that the scrip is held to be a penny stock by the Kolkata Investigation Wing and there has been substantial increase in the share price. The ld. DR further argued that the AO has given a detailed finding with regard to price rigging and how the financial statements of M/s Sunrise Asian Ltd. does not support the increase in the share prices. The ld. DR also argued that the assessee has purchased the shares in Off Market Transaction which would mean that the assessee is well aware of the financial status of the company and therefore the claim that he has invested as a regular investor cannot be accepted. The ld. DR submitted that mere submission of various documents does not discharge the onus on the assessee to prove the genuineness of the impugned transactions. 5. We heard the parties and perused the material on record. The assessee during the year under consideration sold 14000 shares of Sunrise Asian Ltd and claimed the capital gain arising on the sale as exempt under section 10(38) of the Act. It is the contention of the revenue that based on the findings of the Kolkata Investigation Directorate the impugned shares are fo....
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.... in the share market, failed to prove assessee's knowledge about the company etc. We further notice that the other findings of the AO are general pertaining to the scrip of M/s Sunrise Asian Ltd. Though the AO has recorded that the assessee has traded through exit providers who did not respond to notice under section 133(6), the AO did not record any specific finding with regard to the names of the exit providers and any evidence that the assessee has transacted through the exit providers. Therefore in our view, the reasons as recorded by the AO as above cannot be considered as only reason for treating the impugned transactions as bogus in the hands of the assessee without establishing assessee's involvement in the price movement or that the assessee has transacted through the exit providers. The findings of the AO with regard to SEBI report mentions a company name M/s. Monarch Health Services Ltd and its director without recording any finding regarding the assessee's connection with the brokers / entry operator. We in this regard further notice that the Co-ordinate Bench has considered the identical issue in the case of Lalitaben Pravin Shah (supra) where it has been h....
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....ck transactions has been confirmed in those cases. There should not be any dispute that the purchase and sale of shares reported by the assessee is a factual matter and each of the case has to be examined on the basis of facts prevailing therein. In respect of decisions rendered by co-ordinate Mumbai benches, we notice that they did not refer to the jurisdictional Bombay High Court decisions. 11. It is noticed that the AO did not establish any link between the assessee and the reports of investigation wing. At this stage, we may refer to the decision rendered by Hon'ble Supreme Court in the case of Adamine Construction P Ltd (99 taxman 45), wherein, while dismissing the appeal of Revenue, the Hon'ble Supreme Court has referred to the following observations made by Hon'ble Delhi High Court:- "What is evident is that the AO went by only the report received and did not make the necessary further enquiries - such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details....
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....nd the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt....
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.... Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law." 12. We may also refer to the decision rendered by Hon'ble Bom....
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...., the Hon'ble Bombay High Court held as under:- "....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkatta Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkatta Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instruction slips and also received payment from Kolkatta Stock Exchage. 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 o....