AI Drafter 
TaxTMI 
TaxTMI 
2025 (5) TMI 2236
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....69C of I.T. Act 1961 is unjustified, unwarranted and excessive. 3) The addition made in the case of assessee under section 68 at Rs. 1,50,73,436/- is unjustified, unwarranted and bad in law by not accepting the sale value of shares of M/s GCM Securities (India) Pvt. Ltd. sold on stock exchange and received through proper banking channel. 4) The learned A.O. ought to have accepted the long term capital gain on sale of shares at Nil as shown considering provisions of section 10(38) of I.T. Act 1961. 5) The addition made by A.O. at Rs. 1,50,73,436/- under section 68 is illegal, invalid and bad in law. 6) The addition made by A.O. at Rs. 7,53,672/- under section 69C of I.T. Act 1961 is illegal, invalid and bad in law. 7) The learned A.O. erred in making addition at Rs. 7,53,672/- under section 69C without there been any evidence of expenditure incurred by assessee on record. 8) The assessee denies liability to pay interest under section 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234B and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive. 9) Any other g....
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.... Exchange and inferred expenditure for payment of commission at Rs. 7,53,672 assessed under section 69C of the Act. 6. The learned Counsel for assessee furnished gist of submissions which is as under:- Ground No. 1: Addition made by holding that sale proceeds of shares is unexplained credit to be assessed to tax at Rs. 1,50,73,436/- under section 68 of I.T. Act 1961. A) A.O. at Para- 1.2 Page- 2 has noted that sale proceeds of shares at Rs. 1,50,73,436/-. Capital gain on sale of shares of GCM Securities Ltd. is Rs. 1,45,93,436/-. It is concluded that entire amount of sale of shares is unexplained credit under section 68 of I.T. Act 1961 (Para- 26 Page- 68). A.O. has also made addition of Rs. 7,53,672/- as estimated expenditure at 5% of above sum (Page- 69) B) The assessee has derived long term capital gain on sale of shares of M/s GCM Securities Ltd. Capital gain derived is Rs. 1,45,93,436/- and same is not exigible to tax in terms of provisions of section 10(38) of I.T. Act 1961. In the course of assessment proceedings and in appellate proceedings following documentary evidence was placed on record for purchase a....
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....onducted at BSE through registered brokers. It was corroborated from contract notes indicating quantity, date, time and rate of sale. Transaction was through proper banking channel and recorded in books of account. Transaction of purchase and sale of share are reflected in Demat account. Contract notes indicate payment of security transaction tax in respect to transaction of sale of shares. Assessee has held shares for more than 12 months. Requisite conditions for grant of exemption under section 10(38) are fully satisfied. G) Assessee submitted allotment letter of shares in IPO. The shares allotted were directly credited in the Demat account. Purchase of shares verifiable on perusing the Demat account. The share was directly allotted by company to assessee in view of Initial Public Offering (IPO). H) A.O. has found no fault with legal documents. Share purchased by assessee are in the Initial Public Offer. The shares of company were actively traded in the market at stock exchange. Shares purchased by assessee is at fair market value. I) It is undisputed fact on record that sale value of shares is on ruling rate at stock exchange on date of sale. It is als....
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.... statement. Statement which has not stood to the test of cross examination cannot be relied upon to make addition. Reliance on : i) (2015) 281 CTR 0241 (SC) Andaman Timber Industries v/s Commissioner of Central Excise. ii) (1976) 103 ITR 0437 ITO v/s Lakhmani Mewaldas O) A.O. at para 16 page 60 has specifically noted that cross examination of broker is humanly not possible and therefore there is no violation of principles of natural justice as assessee cannot establish that prejudice has been caused to assessee by the procedure followed. Observation of A.O. is contrary to law laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries reported at 281 CTR 241 (SC) and is unjustified. On facts and evidence on record addition made is clearly in violation of principles of natural justice and unsustainable. P) Acquisition of share is not disputed. The share sold at the ruling market rate in open market at BSE is also undisputed fact on record. There is no case for A.O. to hold that long term capital gain arising on sale of shares is unexplained cash credit. A.O. has not brought any evidence on record to show that money in cash is f....
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....eeram Bhawan 10/05/2022 (P- 44 - 46) Delhi 12 (2021) 126 taxmann.com 80 (Delhi) PCIT v/s Smt. Krishna Devi 15/01/2021 (P- 47 - 51) Allahabad 13 (2023) 153 taxman.com 578 (Allahabad) PCIT v/s Smt. Renu Agarwal 06/07/2022 (P- 52 - 53) Madhya Pradesh 14 Hon'ble High Court of Madhya Pradesh at Indore in ITA No. 39 of 2022 in the case of Shri Gopal Tayal 30/05/2024 (P- 54 - 55) 1) ITAT order in ITA No. 1378/Mum/2024 in the case of Amit Sajjan Kumar Gupta 10/10/2024. (P- 24) 2) ITAT order in ITA No. 1120/Mum/2024 in the case of Seema Narendra Bapna 10/10/2024. (P- 25 - 66) 3) (2024) 167 taxmann.com 377 (Mum) Amrita Abhishek Doshi v/s DCIT 27/08/2024 (P- 67 - 76) 4) ITAT order in ITA No. 70/Mum/2024 in the case of Vikram N. Chandan 30/07/2024. (P- 77 - 93) 5) ITAT order in ITA No. 4271/Mum/2023 in the case of Shaily Prince Goyal 30/05/2024. (P- 94 - 147) 6) ITAT order in ITA No. 2944/Mum/2023 in the case of Abhishek Tejraj Doshi 20/03/2024. (P- 148 - 170) 7) ITAT order in ITA No. 1837/Mum/2023 in the case of Alka Dilip Doshi 28/02/2024. (P- 171 - 184) ....
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....f submission, has submitted that the Hon'ble High Courts of Bombay, Orissa, Gujarat, Punjab & Haryana, Rajasthan, Delhi, Allahabad and Madhya Pradesh have considered the additions made under section 68 of the Act in respect to sale proceeds of shares sold on Stock Exchange and claim under section 10(38) of the Act. The judgments rendered by Hon'ble Bombay, Orissa, Gujarat and Rajasthan High Courts have achieved finality on dismissal of SLP by Hon'ble Supreme Court. Various judgements are placed on record to substantiate the submission made. It has been further contended that in view of binding precedents of Hon'ble Jurisdictional High Court, the view taken in the judgment of Hon'ble Kolkata High Court in Swati Bajaj cannot have any adversity. It has been submitted that this is more so in view of settled proposition of law that when two views are available the view favorable to subject needs to be adopted. In view of submission made, it was submitted that appeal of assessee be allowed by deleting the additions made in the assessment framed. 8. The learned Departmental Representative heavily placed reliance on the order passed by the authorities below. He submitted that the transa....
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.... Tax has been paid by assessee at the time of sale apart from other charges collected by stock broker. Contract notes indicate the trade time as well as order number and date of sale of shares. Credit of sale amount in terms of contract note is given in the account of assessee in the ledger book of M/s Anand Rathi Share & Stock Brokers Ltd. and the same is placed on record at Page-9 of the Paper Book. Payment in respect to sale proceeds of shares is through proper banking channel and it is evident from ledger account of assessee in the accounts of stock broker. Demat account of the assessee for the period from 01/04/2014 to 31/03/2015 is placed on record at Page-10 of the Paper Book. Opening shares held in respect M/s GCM Securities Ltd. have been transferred at the time of sale in terms of contract note. Entire documentary evidence has been placed on record before lower authorities to substantiate the genuineness of transaction of purchase and sale of shares by assessee. The investment in shares is reflected in the balance sheet for the assessment year 2014-15. Facts as noted hereinabove are undisputed facts on record. 10. We further noticed that the Assessing Officer has prima....
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....n made by assessee for purchase and sale of shares and are general statements recorded by Investigation Wing of Kolkata. It does not refer to transaction of assessee. The Assessing Officer at Para-16 of the assessment order has noted that it is humanly not possible for the brokers to be present for oral cross examination. The learned CIT (A) has dismissed the appeal by noting that circumstantial factors and human probabilities clearly indicates that the assessee indulged in taking accommodation entries through sale of shares to uphold the action of the Assessing Officer and dismissal of appeal. No evidence, as placed on record, has been found to be incorrect or false in any manner. Written submission as submitted by the learned Departmental Representative again is making general observations without indicating any specific mistake in the legal documentary evidence placed on record. Written submission furnished by the learned Departmental Representative is generalized submission and it has not found any specific mistake in the transaction made for sale of shares by assessee by bringing any legal evidence on record. It does not indicate the legal evidence placed on record in any spec....
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....tes did not match. (d)There were unexplained cash credits in some of the buyer's bank accounts prior to issuance of cheques to the assessees. 11. We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. 12. From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, ....
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....cts in the case of assessee. The Hon'ble Jurisdictional High Court has duly noted and considered the judgement of Hon'ble Supreme Court in the case of Sumati Dayal as can be seen from the extract referred to hereinabove. At Para-10 of the judgement, it is noted that principal broker has confirmed the transaction as sham and explained modus operation as reproduced therein. At Para-13 such statement was concluded to be wrong on producing documentary evidence that shares sold were in consonance with market value. In the case of assessee it is undisputed fact that documentary evidence is placed on record that shares sold are at market value. Legal documents clearly demonstrate genuineness of purchase and sale transactions. It is undisputed fact on record that shares have been sold at the prevalent rate on the stock exchange in the market. Sale of shares in stock exchange is on screen based trading and it is not possible for seller to identify the buyer of shares. Entire transaction of sale of shares is with Registered Stock Brokers. Seller is never connected with buyer and in fact details of buyer are never to the knowledge of seller of shares. Sale consideration has flown from the reg....
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....view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed. 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While t is true that the Commissioner extensively referred to the correspondence and 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 o....
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....hat itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the 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. T....
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.... decision rendered by the Hon'ble Jurisdictional High Court in PCIT v/s Indravadan Jain (HUF), Income Tax Appeal No. 454 of 2018, order dated 12/07/2023, 156 taxmann.com 605 (Bom.) and relevant discussion made by the Hon'ble Bombay High Court are extracted below:- "4. The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had ra....
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....edings, could be the Assessee turned around and make such claim of wanting to cross-examine persons make adverse statements against the Assessee at the stage of the appeal before the ITAT"? 3. The impugned order of the ITAT has sufficiently dealt with the factual details concerning the Respondent-Assessee. The question was regarding the claim of long-term capital gains on shares in terms of Section 10(38) of the Act. During the course of scrutiny assessment, a revised return was filed by the Assessee claiming the above exemption. After the AO rejected the plea, the Assessee went before the CIT(A). The CIT (A) was satisfied that the purchase of liquid shares have been made through Account Payee Cheques and the shares themselves were held in Demat Account for more than 12 months and then sold through the recognized stock exchange after payment of security transaction tax. A reference was made to the CBDT circular which debarred the Revenue from obtaining admissions/ statements during the course of a survey. The ITAT also noted the settled position in law that if an Assessee has wrongly offered an item of income or omitted to make a claim of deduction in the return, he was en....
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....ochar, CCH 411 (Guj.) has considered the addition made by the Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the judgement of the Hon'ble Gujarat High Court is reproduced hereunder for ready reference:- "2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:- "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. V/s IT....
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....xtract from the judgement of the Hon'ble Punjab & Haryana High Court is reproduced hereunder for ready reference:- "4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 at Rs. 11/- and sold the same in the assessment year 2008-2009 at Rs. 400/- per share. In the above case, namely, ITA-18-2017 also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees' income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5. In thes....
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.... the order of the ld. CIT (A) in deleting the addition made by the AO under section 68 of the IT Act by treating the Long Term Capital Gain on sale of shares as unexplained cash credit. The addition of Rs. 1,51,869/- being the deemed commission for taking the accommodation entry, is consequential to the main issue. Hence, the same is also not sustainable." 4. We are of the view that the present appeal does not involve any substantial question of law. Learned ITAT has specifically held that the assessee has produced all the relevant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court reported in 2018 (99) taxmann.com 451 (Raj.) titled as Commissioner of Income Tax, Jaipur V/s Smt. Pooja Agarwal, wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue. 5. In the light o....
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.... appeal. Consequently, it is dismissed." Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified. 22. The Hon'ble Madhya Pradesh High Court in PCIT v/s Shri Gopal Tayal, in Income Tax Appeal No. 39 of 2022, vide order dated 30/05/2024, has considered the addition made by Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the judgement of the Hon'ble Madhya Pradesh High Court is reproduced hereunder for ready reference:- "This appeal is filed by the appellant under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') being aggrieved by the order dated 27.07.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore in ITA No. 246/Ind/2019 for the Assessment Year 2014-15 proposing following substantial question of laws in this appeal:- 1] Whether on facts and circumstances of the case, the ITAT was justified in law in deleting the addition of Rs. 17,78,822/- made by AO, which was confirmed by CIT (A), ignoring the findings of Investigation Wing that M/s Life....
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....n 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 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 question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in ques....
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....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 case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (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. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal (supra) too turns on its own specific facts. The above-stated cases, thus,....
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....ccordingly, in view of the facts and circumstances of the case, we are of the considered opinion that the decisions rendered by the jurisdictional Hon'ble Bombay High Court and various Hon'ble High Courts in the cases cited above shall apply to the present case, since the Assessing Officer has not established that the assessee was involved in price rigging and further the Assessing Officer did not find fault with any of the documents furnished by the assessee. 26. We also noticed earlier that the Assessing Officer has assessed the sale consideration of shares as unexplained cash credit under section 68 of the Act. It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the Revenue. The sale of shares has taken place in the online platform of the Stock Exchange and the sale consideration has been received through the stock broker in banking channels. It is not alleged that shares sold are available with the assessee and are not sold as claimed. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of section 68 of the Act. 27. The learned Departmental Representative has refer....
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....A Nos. 565 & 566/Ahd/2020, for Assessment Year 2012-13 & 2015-16, order dates 13.03.2023 (supra), deleted the addition made by the Assessing Officer in respect of Sunrise Asian Ltd. ("SAL") shares, which is impugned shared before us. We note that Assessing Officer has not been able to point out any evidence whatsoever to alleged that money changed hands between the assessee and the broker or any other person, or father that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. 34. We note that addition under section 18 of the Act made merely on the basis of suspicion presumptions and probability of preponderance without any direct evidence to prove the transactions as non-genuine or sham or demonstrating assessee's involvement in any kind of manipulation, cannot be made. Thus, the assessee has explained and submitted evidences to prove identity, nature of source of the cash credit on account of sale proceeds credited received in the bank account of the assessee and also furnished all evidences comprising contract notes, broker, banking details in support of the genuineness of the transactions. The shares are sold by t....
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.... and not for the purpose of earning exempted income by frequent trading in short span. 6. The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was longstanding and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed. 6.1 On the facts of case, no question of law much less substantial question of law arises. 7. Resultantly, appeal is dismissed." [17] In view of the above, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order passed by the Tribunal. The appeal, being devoid of any merit, is, accordingly, dismissed." 29. The decisions of the Hon'ble Jurisdictional High Court on the subject matter are binding precedents in view of settled position of law. Reliance on the decision of Swati Bajaj of Hon'ble High Court of Calcutta by the learned Departmental Representative was on facts as in the said case and said decision is distinguishable considering facts in a....
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....he judgment of the Hon'ble Supreme Court in CIT v/s Daulat Ram Rawatmull: 87 ITR 349 (SC), wherein the Hon'ble Supreme Court held that if FD in the names of sons of partners are utilized as security by the Firm, then, the onus of proving that Firm was owner of the FD was on the Revenue. In Jaydayal Poddar v/s Bibi Hazra: AIR 1974 SC 171, Supreme Court held that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner is on the person asserting it to be so. It has similarly been held in the case of CIT v/s Bedi & Co. (P) Ltd: 230 ITR 580 (SC). The principle of law thus is that the Assessing Officer cannot treat a transaction as bogus only on the basis of suspicion or surmise. The Assessing Officer has to bring tangible material on record to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares supported by contract notes and demat statements and account payee cheques cannot be treated as bogus. In the facts in the case of assessee Assessing Officer and the learned CIT (A) had not placed on record any ....
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....going discussions, we hold that he sale consideration received on sale of shares cannot be assessed as unexplained cash credit under section 68 of the Act. Long term capital gains declared in the return of income and exemption claimed hereby accepted as shown in return of income. Accordingly, we direct to delete the impugned addition made at Rs. 1,50,73,436. Hence, the grounds raised by the assessee are allowed. 34. In assessee's case in the assessment order at Para-27, it has been noted that reasonable rate of 5% of the amount as commission paid not shown in the books of the assessee to bring back unaccounted money in his books as bogus long term capital gain is being calculated as unexplained expenditure under section 69C of the Act at Rs. 7,53,672, being 5% of the amount of addition made under section 68 of the Act at Rs. 1,50,73,436. The aforesaid addition has been upheld by learned CIT (A) by noting at Para-5 that the assessee might have incurred an expenditure for giving commission to various intermediaries and entry providers. With these observations, appeal of the assessee has been dismissed by the learned CIT(A). The submission made by learned Counsel for the assessee i....