TaxTMI 
TaxTMI 
2025 (9) TMI 1762
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.... No. 217/Chandi/2025 for A/Y 2015-16 in the case of Smt Aarti Singal 3. In this appeal, the assessee has raised the following grounds of appeal :- 1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner 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 addition of Rs. 36,67,21,029/- 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 denying claim of exemption u/s 10(38). 2. That the Learned Commissioner of Income Tax (Appeals)-3 was further not justified to arbitrarily uphold the addition of Rs. 2,34,34,280/- on account of alleged commission expenses alleged paid by the appellant for arranging alleged entries in respect of long term capital gain invoking the provisions of Section 69C of the Income Tax Act, 1961. 3. That the Learned Commissioner of Income Tax (Appeals) further gravely erred in upholding the observation of the Learned Assessing Officer that the transactions relating to purchase and sale of equity shares were sham transactions.....
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....uding the assessee /her family members through Long Term Capital Gain. 4.4 Shri R.K. Kedia, in his statement recorded under oath u/s 132(4) of the Act on 13.06.2014 admitted that he had arranged accommodation entries for the appellant and her family members against commission in the shape of LTCG. He further admitted that such companies, through which LTCG was arranged, 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 has explained the modus operandi through which accommodation entries were provided and has specifically mentioned that the appellant and her family members as having taken accommodation entries through him. He also revealed the names of various accommodation entry providers used for this purpose and has also detailed the modus- operandi followed by them including how the rates of such shares were rigged, unaccounted cash....
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....t in which the said exempt income is deposited, DEMAT Account etc. 4.10 The Assessee vide reply dated 14.11.2017 (Pages 216 - 217 of the PB) furnished the following details :- (i) Details of exempt income of Rs. 36,11,98,913/- earned (Pages 28-29 of the PB); (ii) Copies of allotment advice for allotment of shares (Pages 30 - 49 of the PB); (iii) Copies of contract notes evidencing sale of shares (Pages 50-195 of the PB); (iv) Copies of bank statement from whom payment for purchase of shares was made (Pages 196-197 of the PB) (v) Copies of bank statement where consideration for sale of shares were reflected (Pages 198-202 of the PB) (vi) Copy of ledger account of the appellant in the books of stock broker (Pages 203- 207 of the PB) (vii) Copy of DEMAT statement (pages 208-213 of the PB) 4.11 It was also submitted that the said investment was made for deriving long-term capital appreciation based on the perception that the company had huge expansion plans and the share price by being low it seemed a low risk investment in a company with high growth potential. 4.12 The assessee expressed her inability to produce t....
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....cash. The nexus of the assessee with entry provider proves from the incriminating nature of data seized by the department during the course of search and seizure operation 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 & Seizure operation u/s 132 of the I.T. Act, 1961 was also conducted by the Dl(lnvestigation), Ahemedabad in the case ofSh. Shrish Chandrakant Shah(SCS) on 09.04.2013. Another search and seizure operation u/s 132(1) of the I.T. Act, 1961 was also conducted on Sh. R.K. Kedia and his key employee (Accountant) Sh. Manish Arora by the Dl(lnvestigation) Wing, New Delhi alongwith Bhushan Group on 13.06.2014. During the course of search statement of Sh. Shrish Chandrakant Shah (SCS) was recorded u/s 132(4) of the I.T. Act, 1961. During his statements u/s 132(4) of the I.T. Act, 1961 Sh. Shrish Chandrakant Shah admitted and accepted that he is engaged in providing various types of accommodation entries including exempt long term capital gain. The statement of Sh. R.K. Kedia was also recorded during the course....
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.... alongwith the unaccounted commission expenditure @ 6.5% of the total LTCG of the year for arranging these entries during the F.Y. 2014-15 relevant to A.Y. 2015-16". 5. Against the said action of the Assessing Officer, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals)-3, Gurgaon. During the first appellate proceedings details submission dated 23.05.2019 were filed before the 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. 5.1 The submissions made on behalf of the Assessee were forwarded by the CIT(A) to the Assessing Officer who has furnished his remand report vide letter dated 26.05.2023 which is placed on record, wherein he has reinforced and supported the action of treating the "LTCG" as bogus. A copy of the remand report was forwarded to the Assessee who has furnished a rejoinder vide letter dated 04.07.2023 which is also placed on record wherein the submissions made earlier have been reiterated. 5.2 The CIT(A) has vide order dated 18.12.2024 held that the Appellant has faile....
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....levant time in such trade, but the same were the product of design and mutual connivance on the part of appellant and the dubious operators; ii. The appellant and other family members of M/s Bhushan Power group resorted to a preconceived scheme to procure long-term capital gains by way of price difference in share transactions not supported by market factors; iii. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and thereby fell in realm of not being bona fide and, hence, the impugned exemption u/s 10(38) on alleged long-term capital gain is not allowable; iv. Failure of the appellant to discharge his onus: The appellant has not been able to prove the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly a structured one; v. Ignorance of the appellant about shares and penny stock companies: Appellant has failed to show that he is having knowledge about the shares traded and having any knowledge about the fundamentals of the penny stock companies; vi. Financial analys....
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....n based trading and hence anonymous. According to the Apex Court, such conclusion would be overlooking the prior meeting of minds involving synchronization of buy and sale order that transactions were manipulative/deceptive device to create a desired loss and/or profit. In view of the detailed discussion as above and based on data obtained from various sources and made available on record, the exemption u/s 10(38) claimed on account of said LTCG by the appellant is held to be a sham transaction only to bring its own unaccounted money in the guise of exempted LTCG and only paper work was done to give a color of authenticity to the transactions by creating a facade of legitimate transactions. 8.11 Further, the documents submitted as above to prove the genuineness of transaction, are themselves found to serve as smoke screen to cover up the true nature of the transactions, in the facts and circumstances of the case as it is revealed that purchase and sale of shares are arranged transactions to create bogus profit in the garb of tax exempt LTCG. It is relevant to mention here that the prices have increased many fold times as soon as the period of one year has expired ....
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....hange 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 even admitted this additional income during their proceedings before the department. 8.2 In view of the above discussion, I am of the considered view that share transactions leading to LTCG by the appellant are sham transaction entered into for the purpose of evading tax. Accordingly, it is held that the AO has rightly disallowed the claim and added the said amount of Rs. 36,05,27,391/- u/s 68 of the Act income of the appellant and charged commission @ 6.5% at Rs. 2,34,34,280/- as unaccounted commission expenditure u/s 69C of the Act on net bogus pre arranged LTCG provided to the appellant beneficiary. The same are hereby confirmed. Thus, grounds of appeal Nos. 1-5 are dismissed. 6. Against the order of the Ld. CIT(A) the assessee preferred an appeal before us. 7. During the proceedings before us the submissions made before the CIT(A) were reiterated and it was emphasized by the AR on beh....
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....proving as to how the Assessee was involved therein. (xv) The act of questioning a transaction as sham has to be based on substantial, concrete and tangible evidence and not just hearsay or surmises. 7.1 The AR has also emphasized the fact that the entire case of the Assessing Officer is based on the findings and conclusions in the assessment proceedings for earlier years with no specific evidence or finding for the year under appeal which action is not sustainable given the fact that each year is a separate unit of assessment and the findings/conclusions cannot by themselves and ipso-facto be extrapolated to another year. Before us it has also been argued with respect to the addition u/s 69C that no addition can be made for any assumed/notional expenditure u/s 69C since that section can be invoked only when an expenditure is found to have been incurred and of which the source has not been substantially explained. 7.2 The AR has also emphasized that there is nothing adverse with respect to both the legs of the transactions i.e. purchase/allotment and sale if shares which can lead to any doubts as regards the legal validity, procedural compliance and genuineness there....
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....arti Singal 2011-12, 2013-14 and 2014-15 708,710,711/Chd/2018 20.09.2021 Sanjay Singal 2011-12, 2013-14 and 2014-15 714, 716 and 717/Chd/2018 20.09.2021 Smt Aarti Singal 2013-14 and 2014-15 718 and 719/Chd/2018 20.09.2021 Aniket Singal 2014-15 705/Chd/2018 20.09.2021 Shri Sanjay Singal, HUF 2010-11, 2011-12 and 2012-13 1412, 1413 and 1414/Del/2018 31.10.2018 Shri Brij Bhushan Singal 2010-11, 2011-12 and 2012-13 1476, 1477 and 1478/Del/2018 31.10.2018 Smt Ritu Singal 2010-11 1482/Del/2018 31.10.2018 Smt Uma Singal 2010-11, 2011-12 and 2012-13 1485, 1486 and 1487/Del/2018 31.10.2018 Shri Neeraj Singal 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 ....
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....like the nature of business and the product dealt in, the prevailing competitive environment, the future potential of the sector in which the company operates, the positioning of the company in the sector it operators, Government and statutory regulations, international markets and sentiment, the future potential of investment by PE/lnvestment funds, the perception in the market, the future expected cash flows, etc. Thus, the adverse inference drawn by the Assessing Officer on the ill-founded assumption that the share prices had increased manifold, is totally unfounded and without any valid basis. 9.7 The CIT(A), in particular, has also relied upon the doctrine of preponderance of probabilities and normal human conduct to allege that the transactions undertaken by the Assessee were not genuine and that the 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 apparent 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 transactions is not real in a given case, without bringing on record any tangible material to establish the same. 9.8 In thi....
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....upport of the genuineness of the transaction, nor has attempted to bring on record any independent corroborative material/ evidence to establish that the transactions were bogus. 9.9 To summarise, in the case of the Assessee the shares were acquired by way of preferential allotment directly by the Company for which payment made through banking channels, and which stands duly evidenced by allotment letters issued by the Company sold through the online platform of the Stock Exchange for which payment was received through banking channels after holding them for more than one year and "STT" was duly paid thereon, deliveries for shares were taken/given from the DEMAT A/c and transactions for sale duly evidenced by contract notes. Give 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 t....
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....nd we hold that the CIT (A) erred in upholding the action of the Assessing Officer- (i) in making an addition of Rs. 36,67,21,029/- representing sale proceeds of shares u/s 68 of the Act; (ii) in making an addition of Rs. 2,34,34,280/- u/s 69C of the Act on account of alleged unaccounted commission paid @ 6.5% for earning long-term capital gains; (iii) in holding the transaction of purchase and sale of equity shares as sham. 10. Consequently, grounds of appeal raised are accepted, the appeal is allowed and the order under appeal is reversed. ITA No. 218/CHANDI/2025-AY 2016-17 in the case of Aarti Singal 11. In this appeal the Assessee has challenged the action of the Assessing Officer in treating the transaction in shares leading to income from long-term capital gains of Rs. 18,92,32,161/- as sham transaction and the addition of Rs. 1,15,44,969/- u/s 69C on account of alleged unaccounted commission paid @ 6.5% for the purpose of earning capital gains. During the year the details of the long term capital gains arising to the Assessee are as follows :- Purchases Sale ....
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....C on account of alleged unaccounted commission paid @ 6.5% for the purpose of earning capital gains. During the year the details of the long term capital gains arising to the Assessee are as follows :- Scrip Purchases Sale Profit/ (Loss) AY of purchase No of shares Amount Rate Corporate Action No of shares post Corporate action AY of sale No of shares Amount Rate Maa- Jagdambe Trade Links Ltd (previously Parasampuria Credit & Investments Ltd) 2013-14 375000 3750000 10 Split in the ratio 10:2 1875000 2015-16 1875000 180776816 96.41 177026816 Crescent Digital Tech Pvt Ltd (merged with Parag Shilpa Investments Ltd) Present Name - PSIT Infrastructure Services Ltd 2013-14 150000 1500000 10 Split in the ratio 10:1 1500000 2015-16 1070000 92443324 86.40 91373324 Ram Mineral & Chemicals Ltd (Previously ICVL Chemicals Ltd) 2014-15 110000 0 3691914 3.36 1100000 2....
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.... 2016-17 441969 83619133 189.20 79199443 Total 557472213 17. The facts and grounds in this appeal filed by the assessee are, mutatis mutandis, identical to those in ITA No. 217/Chandi/2025 in the case of the assessee. Accordingly, our above observations, findings and conclusion made in ITA No. 217/Chd/2025 shall, mutatis-mutandis, apply in this appeal also. 18. Accordingly, herein also the grounds of appeal raised are allowed and the order under appeal is reversed. ITA No. 221/CHANDI/2025 - AY 2016-17 in the case of Sanjay Singal, HUF 19. In this appeal the Assessee has challenged the action of the Assessing Officer in treating the transaction in shares leading to income from long-term capital gains of Rs. 31,82,35,411/- as sham transaction and the addition of Rs. 1,99,93,647/- u/s 69C on account of alleged unaccounted commission paid @ 6.5% for the purpose of earning capital gains. During the year the details of the long term capital gains arising to the Assessee are as follows :- Scrip Pur....