TaxTMI 
TaxTMI 
2026 (3) TMI 888
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Income Tax (Appeals)-3,Gurgaon is against law and facts on the file in as much as he was not justified to uphold the action of the Learned Assessing Officer in making an addition of Rs. 28,30,02,558/-representing sale proceeds of equity shares held by the appellant for more than 12 months by invoking the provisions of Section 68 of the Income Tax Act, 1961 and subsequently denying claim of exemption u/s 10(38). 2. That the Learned Commissioner of Income Tax (Appeals) further gravely erred in upholding the action of the Learned Assessing Officer in making an addition of Rs. 1,76,33,254/- on account of alleged commission expenses allegedly paid by the appellant for arranging alleged entries in respect of long-term capital gain by invoking the provisions of Section 69C of the Income Tax Act, 1961. 3. That the Learned Commissioner of Income Tax (Appeals) was further not justified to uphold the action of the Learned Assessing Officer in treating the transactions relating to purchase and sale of equity shares as sham transactions. 4. Briefly, the facts of the case are that the assessee in her Income Tax Return, has claimed exempt income in the form of Long Term Ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were paper companies, controlled and managed by various accommodation entry providers and such companies were not doing any actual work, but were being used to provide LTCG to various beneficiaries through such accommodation entries. 4.5 The Assessing Officer has reproduced the relevant extracts of the statement of Shri R.K. Kedia at pages 4-6 of the assessment order. In the said statement, he explained the modus operandi through which accommodation entries were provided and has specifically mentioned that the appellant and her family members had taken accommodation entries through him. He also disclosed the names of various accommodation entry providers used for this purpose and detailed the modus operandi followed by them, including how the prices of such shares were rigged, unaccounted cash was taken from the beneficiaries, and the same was routed back into their bank accounts in the guise of long-term capital gains. 4.6 For this purpose, commission at the rate of 5% to 6% was charged from the beneficiaries by such operators. The statements of Shri Shrish Chandrakant Shah and Shri R.K. Kedia recorded under Section 132(4) of the Act were also supported by the seizure of a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (v) Name and complete address of the share brokers whose services has been used (vi) How the order are placed through personal visit or over phone (vii) How the decision about investing in shares of a particular company was made (viii) Do the assessee know the business of the companies in which the investment was made (ix) What is the business and location of the companies in which investment is made (x) When was the first time assessee heard about the company in which investment made (xi) Name and complete address of the broker at the time of investment (xii) How the order for sale transaction was placed, provide details with evidence (xiii) How many transactions with the said broker was made in the past through whom the investment was made 4.10 The Assessee vide letter dated 23.12.2019 (Pages175-176 of the PB) provided the reply to the specific queries raised alongwith the following details:- (i) Copy of allotment letter, share certificate, contract note, DEMAT statement and bank statement evidencing purchase through bank mode (pages 22-34 of PB) (ii) Scrip wise details of sale of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w how he came to know about the company whose shares were purchased/sold by him. (f) The assessee is not having any knowledge about the director/CEO of the company. (g) The assessee has not been able to explain as to how he came to know about the broker through whom the shares were sold and contact person who told about the broker. (h) The most important and crucial evidence against the assessee is that the assessee, along with other family members, is indulged in arranging One Time (OT) accommodation entries and LTCG in lieu of cash. The nexus of the assessee with the entry provider is proved from the incriminating nature of data seized by the department during the course of search and seizure operations on 03.03.2010 and 21.02.2014 at the residential and business premises of the assessee and his group, Bhushan Power and Steel Limited, and survey u/s 133A of the I.T. Act, 1961 on the BPSL Group on 27.12.2012. A search and seizure operation u/s 132 of the I.T. Act, 1961 was also conducted by the DI (Investigation), Ahmedabad in the case of Sh. Shrish Chandrakant Shah (SCS) on 09.04.2013. Another search and seizure operation u/s 132(1) of the I.T. Act, 196....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to receive back her unaccounted money in the garb of exempt LTCG. Therefore, the total receipts credited in various bank accounts of the assessee against these bogus/sham transactions have to be treated as unexplained income of the assessee u/s 68 of the Income Tax Act, 1916 alongwith the unaccounted commission expenditure @ 6.5% of the total LTCG of the year for arranging these entries. 5. Against the order of the AO the assessee went in appeal before the Ld. CIT(A). During the first appellate proceedings detailed submission dated13.08.2022 were filed before the Ld. CIT(A) which is placed on record, wherein it was emphasized that the LTCG earned by the Assessee was fully compliant with the provisions of section 10(38) of the Act and was duly liable to be treated as exempt income. Further the Assessee has also emphasized in his submission before the CIT(A) that the AO had relied on the statements of Shri Shrish Chandrakant Shah taken on 09.04.2013 by the Directorate of Income-Tax(Investigation), Ahmedabad, and Shri R. K. Kedia and Shri Manish Arora taken on13.06.2014 by the Directorate of Income Tax(Investigation),Delhi which were recorded much prior to the year under appeal and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....matrix. In any event, appellate findings in other years neither bind the AO nor this authority when confronted with distinct, year-specific trades exhibiting classic penny stock badges. I therefore, distinguish the earlier relief and decline to apply it mechanistically. 9.2 Furthermore, the record reflects issue of notice under section 143(2) on 23.08.2018 and repeated questionnaires under section 142(1) during the course of scrutiny. The queries squarely adverted to the impugned share transactions, sought detailed explanations, and warned of adverse inference in the absence of satisfactory evidence. The law does not mandate a ritualistic, separate show cause if the appellant has already been put to notice of the precise issues and the afforded meaningful opportunity to explain. The appellant responded but failed to cure material deficiencies. There is thus no violation of natural justice. In any case, before me the appellant received full opportunity to fie further evidence or seek cross-examination with justification; none was effectively availed. No prejudice is shown. 9.3 The thrust of the appellant's argument is that the sale consideration was received by che....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cheques while investing in shares or selling of hares is through stock exchange and brokers, but these entities are minutely managed, supervised and controlled by entry/exit operators for earning commission income. The seized record as per Annexure A-23 and copy of cloned seized documents from the premises D-45, Saraswati Garden, New Delhi of LTCG accommodation entries given to the Singals of M/s Bhushan Power and Steel Group using the scrips detailed above. The seized record of 14 pen drives and 3 external hard disk at residence of Shri Manish Arora at D-45, back side GF, Saraswati Garden, New Delhi -110001 on 13.06.2014 provided accommodation entry was being provided to route in unaccounted money as commission basis in this case. Thus, it is not necessary that having contract notes, demat accounts and bank statements, the transactions carried out on stock exchange cannot be manipulated as admitted by the entry operator. Thus, it is seen that the appellant failed to explain the nature and source of credits in the bank account. The commission rates charged have been admitted by various entry providers in their statements and have been admitted this additional income during....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7. During the proceedings before us the submissions made before the CIT(A) were reiterated and it was emphasized by the AR on behalf of the Assessee that:- (i) The entire payment for purchase of shares has been made through banking channels; (ii) The shares were held in demat form for a considerably long period (i.e. almost 18 months) and much beyond the statutory time period mandated for them to be treated as exempt "LTCG" u/s10(38) of the Act; (iii) Sale of shares was undertaken the online platform of a recognized stock exchange after due payment of STT and is evidenced by copies of contract notes issued by brokers (pages35-153 of the paper book); (iv) All transactions for sale of shares were consummated through regular banking channels; (v) The transactions giving rise to the "LTCG" were genuine and carried out in accordance with the prescribed procedures and were duly compliant with the relevant regulatory laws and procedures; (vi) The companies of which shares have been transacted are existing companies and all the transactions have taken place through stock exchange at the prevailing market price; (vii) The additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lotment and sale of shares which can lead to any doubts as regards the legal validity, procedural compliance and genuineness thereof. In that view of the matter since there is no doubt with respect to any of the components giving rise to "LTCG", the legality and acceptability thereof can also not be doubted. 7.3 The AR has accordingly stated that the share transactions were genuine entitling the Assessee to exemption u/s10(38)of the Act on long-term capital gains arising on sale of shares. He has also relied upon the decisions of the coordinate Benches of the Chandigarh Benches and Delhi Bench in the case of the appellant and her family members, viz., Shri Brij Bhushan Singal, Smt. Uma Singal, Smt. Ritu Singal, Sh. Neeraj Singal, Aniket Singal, and Sanjay Singal, for earlier assessment years. Copies of these order have been placed at pages Nos 1 to 393 of PB filed by the Appellant on 24.02.2026. 8. Per contra, the Ld. DR has strongly relied upon the findings of the Assessing Officer as confirmed by the CIT (A) leading to the conclusion that the Long-term capital gains earned by the Assessee on sale of shares was non genuine. 9. We have heard the rival contentions of both t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ingal 9.2 In particular, while reviewing the facts of the particular appeal in the backdrop of the findings of the Coordinate Benches, we observe that the assessee made investments in the various companies as a prudent investor at a reasonable price, which were held for a substantial period and thereafter sold off on a recognised Stock Exchange as soon as the price reached what the assessee felt was the optimal level 9.3 Moreover, the fact that the assessee made the investments in the said companies as a prudent investor at a reasonable price, which were held for a substantial period and were thereafter sold on a recognized stock exchange and on which STT has been paid, stands duly supported by the following contemporaneous/unrebutted documents/material placed on record:- - Shares were allotted by way of preferential allotment directly by the company and the shares were allotted and always held in Demat form by the assessee; - Transaction of sale was undertaken through broker(s),who was a member of the recognized stock exchange; - Copies of documents in support of allotment of shares by way of preferential allotment directly by the Company; ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and normal human conduct to allege that the transactions undertaken by the assessee were not genuine and that whatever seems apparent is not real. It is a settled position in law, and as also held by the Coordinate Benches, that the onus of proving that the transaction is not real is on the person who alleges it to be so. It is not open to the Revenue to simply allege that the transaction is not real in a given case without bringing on record any tangible material to establish the same. 9.8 In this regard the following paras of the order dated 08.10.2024 passed by Coordinate Bench in ITA No. 655/CHD/2023 and 610/CHD/2023 merit attention:- 31. It is not possible to comprehend as to how the transactions under consideration can be said to be against human conduct. As a matter of fact, it is quite normal for an investor to invest in shares and exit after holding the shares for considerable period, as and when favourable market conditions exist. In fact, the movement in the share market is totally outside the control of the assessee/ investor and therefore, it is not possible for the investor/ appellant to plan the exit price. 32. The Assessing Officer entirely fail....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... transactions for sale duly evidenced by contract notes. Given these facts and the compliance of legal provisions and regulatory compliance, there is no cause or reason to treat the entire scenario as bogus and the transactions as sham. 9.10 In this connection, reference may be made to the following extract(para 44 and 45 of the PB)from the order dated 08.10.2024 passed by our coordinate Bench "B" Chandigarh in ITA No. 655/CHD/2023 and 610/Chd/2023 which reads as follows:- "44. 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 material on record tangible material 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. 44.1 In the case of the appellant, shares were acquired by way of preferential allotment directly by the Company and not from any broker. Payment was made through banking channels. Deliverie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 11.1 In this appeal the Assessee has challenged the action of the Assessing Officer in making an addition of Rs 30,87,54,841/- representing sale proceeds of equity shares held by the assessee for more than 12 months by invoking the provisions of section 68 of the Act and making an addition of Rs 1,94,81,340/- u/s 69C on account of alleged unaccounted commission [email protected]%forthe purpose of earning capital gains. During the year the details of the long term capital gains arising to the Assessee are as follows:- Purchase Sales Profit/(Loss) FY No Amt Rate FY No Amt Rate Grandma Trading and Agencies Ltd 2011-12 7500000 7500000 1/- 2015-16 7500000 205617705 27.42 198117705 ICVL Chemicals Ltd. 2013-14 459871 1541928 3.35 2015-16 459871 103137134 224.27 101595206 Total 308754839 299712911 11.2 The facts and grounds in this appeal filed by the assessee are, mutatis mutandis, identical to those in ITA No. 1145/Chd/2025 in the case of the Smt Aarti Singal. Accordingly, our above observati....