TaxTMI 
TaxTMI 
2026 (2) TMI 759
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....ed the deletion of the addition on account of commission amounting to Rs. 7,96,365/-, u/s. 69C of the Act towards the 2% on the total consideration of the sale of shares amounting to Rs. 3,98,18,275/-. 3. Brief facts of the case are that the assessee is an individual and had filed his return of income dated 06.10.2015, declaring total income at Rs. 3,92,540/- as income from salary and business income. The assessee's case was selected for scrutiny and notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. The Ld. AO observed that the assessee has earned long-term capital gain amounting to Rs. 3,93,92,775/- on sale of shares during the year under consideration which was claimed exempt u/s. 10(38) of the Act. The ld. AO passed the assessment order u/s. 143(3) of the Act determining total income at Rs. 4,10,07,180/- after making an addition of Rs. 3,98,18,275/- u/s. 68 of the Act, being the sale proceeds on account of long-term capital gain (in short "LTCG") on sale of the scrip of M/s. Pine Animation Ltd. and Rs. 7,96,365/- u/s. 69 of the Act, towards the commission @2% on the said transaction alleged to have been paid to the entry operators. 4.....
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.... PCIT-5 vs. Laxman Industrial Resources Limited, in ITA No. 169/2017, C.M. Appl. 7385/2017, order dated 14.03.2017 along with various other decisions. The ld. AR prayed that the addition be deleted and as an alternative relief, the assessee should be given an opportunity of cross examination along with details of the materials relied upon by the ld. AO to be furnished to the assessee. 7. The Departmental Representative ('ld. DR' for short) on the other hand controverted the said facts and stated that the assessee has failed to substantiate the transaction entered into by the assessee pertaining to the scrip of M/s. Pine Animation Ltd. The ld. DR further contended that the assessee has also failed to substantiate as to the financials of the said company and the reason for the exorbitant hike in the share price in the absence of any extraordinary events such as mergers, acquisitions, etc. during the year under consideration. The ld. DR also stated that SEBI has clearly identified the said scrip to be a penny stock and the ld. AO has also given details of the exit providers of these accommodation entry operators pertaining to the said scrip. The ld. DR relied on the order of the Ho....
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....unds were raised through preferential allotment which was not utilized for the business expansion of the company and the same has been advanced as loans and investments. The ld. AO held that the entire transaction was pre-arranged for the purpose of claiming bogus long-term capital gain to various beneficiaries by way of sale of shares after duly rigging the price of the shares in stock exchange. The ld. AO has also corroborated his finding by duly recording the statements of share brokers and the exit providers who have consented that the share of M/s. Pine Animation Ltd. was a mere penny stock for providing bogus long-term capital gain/ short-term capital gain/loss. 9. The lower authorities held that the transactions to be a pre-arranged method to evade tax with the connivance of the accommodation entry providers. The assessee has bought these shares on 15/03/2015 for Rs. 15,00,000/- through preferential allotment/private placement and had sold the same from 07/04/2024 to 10/07/2014 for Rs. 3,98,18,275/- after the lock-in period of one year as per Securities & Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations, 2009. The modus operandi is that the....
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.... the assessee also extensively relied on the finding of the co-ordinate Bench, in the case of Income Tax Officer vs. Manisha Narpatkumar Chopra in ITA No.2443/Mum/2023 order dated 20.08.2024 where on identical facts which was related to the same penny scrip, the Tribunal has decided this issue in favour of the assessee. The relevant extract of the said decision is cited herein under for ease of reference: "11. We heard rival contentions and perused the record. We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkatta in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation Wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the ass....
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.... found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group, which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee. 13. Both the parties relied on various case laws before us. We may refer to the some of the decisions rendered by Hon'ble jurisdictional Bombay High Court. In the case of Shyam Pawar (54 taxmann.com 108) (Bom), the Hon'ble Bombay High Court has observed as under:- "3. Mr. Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an inv....
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....s listed in the appraisal report and it is stated to be involved in the modusoperandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr. Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Rev....
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.... dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law." 14. In the case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No. 2012 of 2017 dated 4th March, 2022), the Hon'ble Bombay High Court has observed as under:- "2. We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") 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 the assessee that it has participated in any price rigging ....
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....ment from Kolkatta Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal." 16. The Ld. DR has placed reliance on the decision rendered by the Co-ordinate Bench in the case of Hitendra C Ghadia(supra), wherein the Tribunal had confirmed the additions relating to long term capital gains arising on sale of penny stock. We have gone through the said order passed by the Tribunal. First of all, we notice that none of the binding decisions rendered by Hon'ble jurisdictional Bombay High Court has been referred to by the Tribunal. Secondly, it has been mentioned clearly that the decision has been rendered on the basis of facts prevailing in....