TaxTMI 
TaxTMI 
2026 (3) TMI 1488
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....to securities transactions are duly disclosed". Notice u/s 143(2) dated 07.07.2017 was issued to the assessee. Notice u/s 142(1) was issued. Sh. Satvinder Singh CA, Authorized Representative for assessee filed various details on ITBA portal. On completion of proceedings Ld. AO vide order dated 21.12.2018 made additions of Rs.3,38,01,547/- and Rs.8,45,038/-. Against order dated 21.12.2018, assessee filed appeal before Ld. CIT(A) which was partly allowed vide order dated 28.02.2025 and deleted addition of Rs.3,38,01,547/-. 3. Being aggrieved, the Department of Revenue preferred the present appeal on following grounds: "1. Whether on the facts and in the circumstances of the case, the Ld. CTT (A) has erred in deleting the addition of Rs. 3,38,01,547/- u/s 68 of the Act and addition of Rs. 8,45,038/- u/s 69C of the Act by ignoring the larger scam of organized tax evasion by way of bogus capital gain generated in penny stock? 2. Whether the Ld. CIT(A) has committed substantial error in law in deleting the disallowances of LTCG of Rs. 3,38,01,547/- overlooking that the entire transactions were stage managed with the object to facilitate the assessee to plough back it....
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....m 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 fell in realm of not being bona fide and, hence, impugned Long Term Capital Gain is not allowable. (iv) The findings of SEBI referred above has also given the similar finding that the prices of the shares were determined artificially by manipulations and cannot be considered a product of market factors and commercial principals. 5.1 Further, during the assessment proceedings, the assessee failed to discharge its onus to prove that the alleged transactions were not sham. Moreover, the assessee was not able to prove that the unusual rise and fall of share prices was natural and based solely on the market forces. It was evident that such share transactions were closed circuit transactions and clearly structured one. The financial analysis of the penny stock companies (i.e. Kalpa Commercial Ltd and Aplaya Creations Ltd (previously known as EINS Edutech Ltd.) established that the net worth of these companies were negligible. The cash trail in the accounts o....
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.... and further it was held that merely because a transaction was done through banking channel itself could not validate the genuinity of the transaction and the burden of proof was on assessee to prove genuineness of the claim. 5.5 Further during the course of the hearing the counsel of the assessee argued that the issue of penny stock in the case of Kalpa Commercial Ltd. And Aplaya Creations Ltd. (previously known as EINS Edutech Ltd.) is covered by the decisions of Hon'ble ITAT, Delhi Bench in the cases of ITO Vs Shivani Gupta, Pooja Gupta Vs ITO and ITO Vs Renu Gupta and in assessee's own case for A.Y. 2015-16 which is not true as in the case of Pooja Gupta Vs ITO the scrip involved is M/s Dhanicela Investment & Trading Co. Ltd. Further in the cases of Shivani Gupta and Renu Gupta the scrip involved is only Aplaya Creations Ltd. (previously known as EINS Edutech Ltd.). No case law has been brought on record by the assessee with respect to the scrip Kalpa Commercial Ltd. 6. Ld. Authorized Representative of respondent assessee submitted that the AO has made the impugned addition only on the basis of suspicion without finding any discrepancy in the documentary evidences....
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....ce Unrebutted: The AQ has net identified discrepancies in the appellant's documents or provided evidence of fraud. In tax law, documentary evidence carries significant weight unless contradicted by cogent material. * Stock Exchange Mechanism: Transactions through a recognized stock exchange are transparent and regulated, reducing the scope for direct manipulation by the seller. The AO's concern about share price jumps is valid but irrelevant unless the appellant's involvement is proven. 8.4 Appellant has relied on the precedent followed by Hon'ble CITIA) and ITAT. The CIT (Appeals) order for A.Y. 2015-16 deleted a similar addition for EINS Edutech Limited shares, indicating consistency in the appellant's favor. For sake of completeness same is extracted here as under: 6.1.1 Through Ground Nos. 1 to 6, the appellant has impugned the addition of Ra 22.50 lacs to the income of the assessee by the AO by rejecting the claim of exemption u/s 10(38) of the Act earned through sale of listed equity shares of M/s Ein Edutech Ltd (previously known as Thyrocare Laboratories Ltd) on BSE. Since grounds are in respect of common issue hence these grou....
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....al structure obtained from the internet. It is noticed that during the period under consideration the company has authorized capital of 15 Crore and issued share capital of 14.38 Crores. He alleged that the net worth of the company is negligible and even then the share prices have been artificially rigged by the group of operators to accommodate beneficiaries seeking LTCG or STCL. He apprehended that no prudent business man and particularly trader or Investor in stock will invest in such penny scrip which is defunct and in-operative. The AO has discussed the business activity of the company that the income earning is very low. The company is in education business to readymade garments and trading of sarees. The AO has also reproduced the relevant questions of the statements of Sh. Bhagwan Das Aggarwal (one of the director of the company) dated 10/01/2014 and Sh. Pawan Kumar Kayan (a sub-broker and cine of the exit provider) dated 30/03/2015 recorded u/s 131 by the Kolkata Directorate in which they accepted that they are arranging accommodation entries on commission basis 8.1.3 During the assessment proceedings, the AO had called the assessee is 131 and recorded his stateme....
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.... this business as on 31/03/2015 his total cost of investment in the shares is Rs. 14,30,73,530/-, During the year, the appellant has declared capital gain of Rs. 1,72,22,515/- out of which Rs. 1,69,91,142/- is STT paid. The AO has doubted the capital gain only in the case of Eins Edutech Lid. He strongly relied on the report of the Kokata Directorate and on the basis of which he held the LTCG as bogus and disallowed the entire claim made u's 10(38) and added Rs. 22.50 lacs to the income of the appellant. The AO has not made any independent enquiry to prove that the transaction was sham in nature. He falled to bring any material on record to prove that the appellant was also involved in bogus share transactions and he was directly involved in any manner to get benefitted with the bogus entries of LTCG. Mere reliance on the investigation report without directly pin pointing the role of the appellant in the transactions it is not justifiable to disallow his claim of exempt Income uls 10(36). In view of the submissions made by the appellant and his reliance on various case laws including decisions of jurisdictional ITAT under the identical facts eg. Sanjeev Jain vs ITO ITA No. 3381....
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.... of assessee. The assessee admittedly filed copy of the bank statement, contract note for sale of shares, documents of purchase of shares and Demat Account to show assessee genuinely entered into transaction which have not been doubted by the A.Ο. The A.O. merely suspected the transactions of the assessee because of the modus operandi of some of the brokers of penny stock companies who indulge in sham transactions. The A.O. did not make any independent inquiry into the matter. No evidence was collected against the assessee directly or indirectly for her involvement in sham transactions. The A.O. did not bring any material on record to prove as to how the assessee was involved in sham transactions. The A.O. merely proceeded on the basis of the low financials of the company for low purchase price to come to the conclusion that transactions were accommodation entries and thus sham transactions. The conclusion drawn by the A.Q. that there were conversion of the unaccounted money by taking sham long term capital gains in this manner is entirely suspicion of the A.O. which is unsupported by any material on record. The assessee has explained before the authorities below that incre....
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....e appellants did not find place in the said lists and on the given facts, all these appeals were decided in favour of the assessee and against the revenue and order of the coordinate bench has been upheld by the Hon'ble High Court of Delhi in ITA No. 125/2020, 130/2020 and 131/2020 vide order dated 15.01.2021. The relevant findings of the Hon'ble High Court of Delhi read as under: "11. On a perusal of the record, it is easily "11. discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the Iment 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 adverse to comment on ....
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....king channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions 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 regard to observations made by the CIT(A) w....
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.... elsewhere because the same exparte Ad-Interim order of SEBI was considered and facts are mutatis mutandis same. We, accordingly, direct the Assessing Officer to accept the long term capital gain declared as such and delete the addition of Rs. 2, 10,23,848/-. 22. Before parting, the Id. DR has supported his submissions by supplying print outs of the Metropolitan Stock Exchange and The Economic Times Markets, which we find that he must have searched from Google petwork wherein the Id. DR pointed out that SEBI now vide order dated WTM/SM/VD/D3/9896/2020-21 dated 22.12.2020 has issued the following directions: 'Notice nos. 2 and 3 (promoters of the Company) are directed to make a public offer through a merchant 11 banker to acquire shares of the Company from public shareholders by paying them the value determined by the valuer in the manner prescribed in Regulation 23 of the SEBI (Delisting of Equity Shares) Regulations, 2009 and acquire the shares offered in response to the public offer, within three months from the date of this Order. II. BSE to facilitate valuation of shares to be purchased as directed at (1) above, and compulsorily delist the Company....
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....document or market by issuing prospectus, advertisement soliciting money from the public in any manner for a period of 8 years. prospective. Obviously, this restraint is prospective. 24. In the result, the appeal filed by the assessee in ITA No. 8142/DEL/2018 is allowed." 7.1. The issue is, therefore, by the aforesaid Order of the Tribunal in favour of the assessee wherein the Tribunal followed the Judgment of Hon'ble jurisdictional Delhi High Court and has deleted the entire addition. The Tribunal has considered almost similar circumstances and do not find any allegation against the assessee for earning bogus long term capital gains under section 10(38) of the I.T. Act, 1961. The initial onus upon the assessee to prove source of the money credited in the Bank account of the assessee has been discharged by producing the documentary evidences and material on record. The A.O. did not rebut the documentary evidences furnished by the assessed. Therefore, the Ld. CIT(A) on proper appreciation of facts and material on record correctly deleted the addition. We, therefore, do not find any infirmity in the Order of the Ld. CIT(A) in deleting the addition. In view of th....