TaxTMI 
TaxTMI 
2026 (4) TMI 771
X X X X Extracts X X X X
X X X X Extracts X X X X
....LTCG as unexplained expenditure u/s 69C of the Act. 2. On the facts and in the circumstances of the case, the Ld. CIT(Appeals), NFAC erred in allowing the appeal of the assessee ignoring the fact that investigation on the basis of information carried out by the Kolkata Investigation Wing and Mumbai on the basis of statement of various entry provider, share brokers, exist providers had unearthed the modus operandi of investments in penny stock for obtaining bogus LTCG as in the assessee's case. 3. On the facts and in the circumstances of the case, the Ld. CIT (Appeals), NFAC erred in allowing the appeal of the assessee by ignoring the fact that the fundamentals of the M/s. GCM Securities do not corroborate with the instant hike in the price of its share and without examining the same to arrive at the conclusion. 4. Any other grounds which may be raised at the time of hearing with the permission of Hon'ble ITAT." 3. In the present case, assessee has filed his return of income for AY 2015-16 on 21/10/2015, declaring total income of Rs. 15,58,120/-. Case was selected for scrutiny, statutory notices u/s 143(2) & 142(1) of the Act were issued and duly served....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. The learned Departmental Representative furnished written submission with a prayer that the Tribunal is requested to consider the totality of circumstances as transactions are shown to be very complex and where meeting of mind cannot be established. Reliance has been placed on judicial precedents as discussed in the written gist of submission. He has referred to modus operandi as indicated in the assessment order on the basis of investigation made by the Department. It has also been noted that non-provision of cross-examination of person involved in accommodation entries is not material, as person whose statements are recorded have only confirmed the modus operandi. It has been also noted that direct evidence is not necessary and test of preponderance of probability be applied in such cases. It is on this basis it has been submitted that appeal of department be allowed. 6. On the other hand, learned counsel for the assessee submitted that the issue involved in present appeal is squarely covered by decision of the Hon'ble Bench of this Tribunal in the case of Rameshwarlal Mathuraprasad (HUF) vs. ACIT in ITA No.37/Nag/2025 vide order dated 14/05/2025. It is submitted that afore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Act in respect to sale proceeds of shares sold on Stock Exchange and claim u/s 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 judgments 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. 9. We have heard the rival submissions and perused the material available on record. In the present case assessee was allotted 24,000 shares at the price of Rs. 20 per equity share pursuance to application for shares made by assessee for 60,000 shares. The share application form and allotment letter issued by M/s Purva Shareregistry (India) Pvt. Ltd. is placed at page Nos. 3 & 4 of the Paper Book. The assessee had made application for 60000 shares and was allotted 24000 shares. Demat acc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....va Shareregistry (India) Pvt. Ltd. is placed on record at Page-1 & 2 of the Paper Book. The assessee had made application for 60,000 shares and was allotted 24,000 shares. Demat account for the period from 01/04/2013 to 31/03/2014 is placed on record at Page-3 of the Paper Book. It indicates that on 03/04/2013, the assessee has received 24,000 shares in the initial public offering. In the aforesaid account, the assessee has also received share of M/s Power Grid, allotted in initial public offering at 1,029 shares. The shares held by assessee in M/s GCM Securities Ltd. have been sold through M/s Anand Rathi Share & Stock Brokers Ltd. during the period from July 2014 to September 2014. Contract note for sale of shares are placed on record at Page-4 to 8 of the Paper Book. It is evident from the contract note that Security Transaction 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er, the Assessing Officer has not brought on record any material to show that the assessee was part of the group which involved in the manipulation of prices of shares. The Assessing Officer in the assessment order at Page-49 has noted that it is not the case of this office whether purchase of shares through preferential placement/ merger did actually took place or shares were sold on the exchange at the prevalent market rates after paying STT or not. The Assessing Officer has concluded on the basis of analysis, circumstantial evidences, human conduct and preponderance of probabilities is that what is apparent in this case is not real that these financial transactions were sham ones and that this entire edifice was only a colorable device used to evade tax. Statements referred to in the assessment order are not in relation to transaction 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 dismi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal. 5. We also find no infirmity in the order passed by the ITAT and no substantial questions of law as pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 28. The Hon'ble Gujarat High Court in PCIT v/s Divyaben Prafulchandra Parmar, Income Tax Appeal No.812 of 2023, vide order dated 02/01/2024, has dismissed the appeal of the Revenue. The Hon'ble High Court at Para-11 of the judgement has reproduced the order of the ITAT wherein reliance on judgement of Swati Bajaj of the Hon'ble Calcutta High Court is considered. Relevant extract of judgement is reproduced hereunder:- "[11] The Tribunal also distinguished the judgement relied upon on behalf of the Revenue in the case of Swati Bajaj (supra) in following paragraphs: "33. We note that Ld DR for the Revenue heavily relied on the Judgement of Hon'ble Calcutta High Court in the case of Swati Bajaj and other (supra), however, we are of the view that as per the judgement of Hon'ble High Court of Bombay in the case of Thanna Electricity Supply Ltd (1994) 206 (ITR) 727 (Bom) wherein it was held that decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. Hence we note that judgment of Hon'ble Calcutta High Court in the case of Swati Bajaj and others (supra) should not be applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xx [16] Considering the contentions raised on behalf of the Revenue,the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non-genuine transaction by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under: "5. The genuineness of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er at Para-14. At Para-4 of the judgement, it has been noted that reliance on the aforesaid judgement does not help the Revenue inasmuch as the facts in that case were entirely different. In the light of above factual position, there remains no adversity from the said judgement relied upon by the learned Departmental Representative. The learned Departmental Representative has also referred to the decision of Hon'ble Supreme Court in CIT v/s Sumati Dayal reported as 214 ITR 801 (SC). The aforesaid decision has also been considered by the Hon'ble Jurisdictional High Court in CIT v/s Smt. Jamnadevi Agrawal, reported as 328 ITR 656 (Bom.) while considering provisions of section 68 on sale of shares. The extract of aforesaid judgement has been reproduced in this order at Para-11. In the judgement at Para-15, the Hon'ble Jurisdictional High Court has concluded that decision relied upon by the counsel is distinguishable on facts. In view of above factual position, there remains no adversity in respect to such judgement relied upon by learned Departmental Representative. 31. The entire case of the Assessing Officer is based on the preponderance of probabilities and the normal huma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the case of McDowell & Co (supra), the Supreme Court had made the following pertinent topical observations:- "We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some under laying motive supposedly resulting in some economic determent or prejudice to the national interest, as perceived by the respondents." 32. On the facts and evidence on record, it is evident that no opportunity of cross-examination has been provided to the assessee in respect to statement of persons referred to in the assessment order to draw adverse inference. On the contrary, at Para-16 of assessment order, it has been noted that no opportunity to cross-examination to broker is humanly possible. Reliance on the statement which has not stood to the cross-examination is violation of principles of natural justice and contrary to law laid down by the Hon'ble Supreme Court in Andaman Timber Industries, reported as 127 DTR 241 (SC). The addition made by the Assessing Officer being contrary to law laid down by the Hon'ble Supreme Court is held to be unjustified. 33. Considering the totality of facts and on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n is made has been held to be incorrect and thus consequent addition made by the Assessing Officer for alleged expenditure is unjustified and unsustainable. It is seen that the Assessing Officer has made adverse inference which is not based on any material or evidence on record. The Assessing Officer has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require explanation by the assessee. It is settled position of law that onus is on the Assessing Officer to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no evidence of expenditure incurred by the assessee, the question of any addition for the same does not survive. The addition made by the Assessing Officer is unjustified and unsustainable. We, therefore, hold that there is no case for making any addition under section 69C of the Act at the hands of the assessee. The addition made by the Assessing Officer and upheld by learned CIT(A) at 7,53,672 is directed to be deleted. Thus, the grounds challenging the addition of 7,53,672, of the assessee is allowed. 35. I....