TaxTMI 
TaxTMI 
2026 (3) TMI 121
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....g Officer noticed that the assessee has claimed exemption u/s 10(38) of the Act to the extent of Rs. 4,62,18,791/- on account of long term capital gains from purchase and sale of shares of M/s. Goldline International Finvest Ltd. and observed that the reasons for scrutiny itself that there were suspicious sale transactions in shares. In order to ascertain the genuineness of the transactions, specific query was made vide order sheet entry dated 05.09.2017, the assessee was asked to give complete details of shares purchased and sold on which capital gains was claimed as exempted. In response, the assessee submitted as under: "The Shares bought and sold are of a listed company. Gold Line International Finvest Ltd. share is purchased on December 2012 and March 2013 and sold on various dates from May 2014 to September 2014 by cheques as mode of payment made and receipts. The shares are transfer in and out in demat account and the transactions are floated on the floor of BSE (Bombay Stock Exchange) i.e. recognized stock exchange through SEBI & BSE registered broker. Also please appreciate during this period BSE Sensex increased from 18568 as on 28/03/2012 to 27319.85 as on 08/09....
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....r and director finance in one of the public limited company. 6. The payment was made through account payee cheques. In support of this bank statement is attached for this period. 7. The assessee has been dealing in shares of a long time and making profits and losses as per market conditions and the lump in share prices is as per the market conditions. The share is listed on Bombay Stock Exchange which is under the surveillance of SEBI and BSE on day to day basis. Gold Line International Finvest Ltd share is purchased on December 2012 and March 2013 and sold on various dates from May 2014 to September 2014 by cheques as mode of payment made and receipts. The shares are transfer in and out in demat account and the transactions are floated on the floor of BSE (Bombay Stock Exchange) i.e, recognized stock exchange through SEBI & BSE registered broker. Also please appreciate during this period BSE Sensex increased from 18568 as on 28/03/2012 to 27319.85 as on 08/09/2014, which justifying the capital gain. The abstract of share transactions is supported by contract notes for sale and purchase of shares, demat account statement showing transfer in and transfer o....
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....atements etc., which is again submitted herewith in Annexure - B, the same could not be treated as bogus simply on the basis of some reports of the Investigation Wing and/or the orders of SEBI and/or the statements of third parties. In support of the aforesaid submissions, the Id AR, in addition to the aforesaid judgements, has referred to and relied on the following cases:-" 6. The assessee relied of various case laws and further, with regard to report from Investigation Wing, the assessee has submitted as under: - "a) That number of companies listed at BSE is about 5000 and more than 1600 companies are listed at NSE. The number of investors, investing in shares, debentures, mutual fund is more than 2 crores. That listing permission is being given by the BSE, NSE and SEBI after due diligence only i.e. after verifying the net worth of the company, directors and their addresses also. Moreover, any change in address of company and directors is informed to NSE, BSE and SEBI time to time by the company. b) That increase / decrease in price of share listed is closely monitor by exchange on minute to minute and daily basis accordingly stock circuit is being changed a....
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....copy of Demat Statement reflecting the delivery of the shares from the account of the Appellant was provided to prove the genuineness of the transaction. iii)that all payments made for acquiring shares and proceeds of the sale of the shares were through banking channel and no element of cash was involved. iv) the copy of Contract note for sale of shares were submitted during the assessment proceedings which have not been proved wrong or disputed. v) the appellant is well versed with investment portfolio, being an exbanker and director finance in one public limited company. 1.3 On the facts and in the circumstances of the case and in law, the learned assessing officer erred in making the addition: i) without bringing any material evidence on record to justify the applicability of modus operandi discussed in the order to the facts of the appellant's case. ii) without any material evidence on record to show that the appellant was specifically named in the transaction relating to bogus LTCG Claims. iii) without providing the material possessed by the department and used by him for framing the assessment and making addit....
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....nancial year 2012-13 and sold the same on 15.05.2014. He further submitted that the third party investigation and their findings were not confronted to the assessee. He also submitted that the assessee had purchased and sold the same through stock exchange and also settlement through banking channel. Further, he submitted that the facts in the present case and in the case of Krishna Devi are exactly similar and in the case of Krishna Devi wherein Hon'ble Delhi High Court decided the issue in favour of the assessee. In this regard, he brought to our notice, the relevant findings of the Hon'ble High Court in the form of written submission and also heavily relied on the decision of the Co-ordinate Bench in the case of Archit Gupta, ITA No. 2624 & 2625/Del/2022, he placed the relevant order on record. Further, he submitted as under: "The assessment order or the CIT-A order does not contain even a whisper that the document submitted by the Appellant was not genuine/ were defective. It is submitted that the payments were received through banking channels and transaction were done through recognized stock exchange. The inflow of shares is reflected by way of physical share certif....
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....long term capital gains arising out of sale of shares as exemption under Section 10(38). The Assessing Officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature. The Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under Section 10(38) of the Act. The High court by impugned order held that no substantial question of law arose from Tribunal's order. The SC dismissed the SLP against said impugned order." 11. On the other hand, Ld. DR brought to our notice page 6 of the Assessing Order, wherein the financials of M/s. Goldline International Finvest Ltd. was analyzed by the Investigation Wing, and the report is exhaustive to show that the above said script was picked to manipulate the value of shares. Further, she brought to our notice SEBI order dated 28 June, 2023, wherein SEBI has investigated the scripts of ....
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....he astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes 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 averse 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 pre-planned 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 ....
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.... relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however, the 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 As....