TaxTMI 
TaxTMI 
2024 (7) TMI 1777
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....and ploughed back to the books of accounts in the guise of pre-arranged LTCG which remains unexplained for want of cogent and satisfactory explanation. 2 The Ld. CIT(A) has erred in deleting the addition of Rs. 80,06,545/- u/s 68 of the Act in spite of the fact that the assessing officer has established the fact that assessee's purchase is not substantiated by the bank account statement for transfer of money in lieu of share purchase. 3 The Ld. CIT(A) has erred in deleting the addition of Rs. 80,06,545/- u/s 68 of the Act though it has been proved that TuniTexiles Mills Ltd and KGN Ltd was established as penny stock company by the Investigation Wing Kolkata and Patna respectively. 4 On the basis of the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 5. That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal. It is therefore prayed that the order of the CIT(A) may kindly be set aside and that of Assessing Officer be restored." 3. The facts of the case which can be stated quite shortly are as follows: The assessee before us, is a hindu undivided fami....
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.... fact, the assessee has invested in the share after doing research and based on the Annual report and News Article which predicted strong potential for the company. Any investor world by the share available at low price more so when the company has stable outlook and exponential growth expected in future. d) The scrip is not listed under Penny stock with a very low market capitalization Your Good self-have relied upon the data available from investigation Report that the scrip in penny stock. Even that report is not shared with us and we request to share that report if you are going to rely upon that report. However, no independent inquiry is done by the assessing officer on his own. From the public domain it is learnt that the said report classifies the share as penny stock if the market capitalization of the company is less than 10 Lakhs. It is not classified as penny stock in the scrip under question / review so even that allegation is not correct factually in the present case. It is further evident from the information in public domain that the market capitalization of Tuni Textiles Mills Limited was Rs.2.62 Crores (approx.) in August, 2010 when the assessee purchased ....
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....facts further establish that 'Tuni Textiles Mills Limited is not penny stock ⮚ The scrip has not been delisted from the stock exchange and even today there is trading in the scrip unlike in cases of penny stock where the scrip is delisted from the stock exchange. ⮚ The scrip is traded on both BSE and NSE. Generally, penny stock scrips are only traded in BSE. ⮚ There is a strong reason for rise in value of share as evidenced from the Annual Reports of the company placed on record vide previous submission. ⮚ There is no evidence of cash taken or given in the present case which is generally the case in penny stock companies. ⮚ There is no evidence of any exit provider, accommodation entry provider in the present case which is generally the case in penny stock companies. ⮚ There is no evidence that the scrip or broker through whom assessee has made transaction of purchase and sale was suspended. 16. It is submitted that in the present case, as stated above, none of attributes are present are normally there in penny stock companies. 17. My care is fully covered by the de....
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....ssing officer, rejected the above submissions of the assessee and noticed that assessee had purchased shares of Tuni Textile Mills Limited and KGN Limited for sum of Rs. 1,62,250/- and subsequently these shares were sold for sum of Rs. 82,02,300/-. The resultant capital gains of Rs. 80,06,545/-was claimed exempted u/s 10(38). The assessing officer alleged it to be penny stock and he claimed that the trading in such stock was controlled by few operators and rise in prices of this stock was artificially created. He also gave finding that he re-opened the case based on information received from Director of Income Tax (Inv). He suspected about the same and presumed that the trading was prearranged. The assessing officer, finally treated entire sale consideration as bogus and added Rs. 80,06,545/- to total income of assessee, as unexplained cash credit u/s 68 of the Income Tax Act. 6. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before Ld. CIT(A), who has allowed the appeal of the assessee, observing as follows: " 6.4 The assessee claimed the transaction to be genuine and filed following documents before learned assessing officer....
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....ssee and/or his broker. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the Ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the Id AO was not justified in disallowing the assessee's claim of exemption under section 10(38) of The Act. Kiran Kothari Vs ITO [ITA 443/Kol/2017] "we note that the assessee had furnished all relevant evidence in the form PARTMENT of bills. contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the assessing officer nor by the Id. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim....
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....Punjab & Haryana High Court-ITA-95-2017 ● Hitesh Gandhi - Punjab & Haryana High Court-ITA-18-2017 ● Pooja Agarwal - Rajasthan High Court - Income Tax Appeal No 385/2011 ● Meghraj Singh Shekhawat - ITA No 443 and 444/JP/2017 ● Pramod Jain and others - ITA No 368/JP/2017 ● Meenu Goel-ITA No 6235/DEL/2017 ● Mohit Hora (HUF) ITA No 410/DEL/2018 6.9 In view of the facts and circumstances of the case and having regard to varied judicial pronouncements including jurisdictional ITAT, I am of the considerate view that the learned assessing officer has not carried out investigation of the fact of the case which are specific to the assessee and has also not provided opportunity for cross examination which is against principle of natural justice. Therefore, the additions made by the learned assessing officer for sum of Rs. 80,06,545/- on account of capital gain is deleted. 6.10 Accordingly, the appeal made by the assessee is allowed." 7. Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us. 8. The Learned Senior Departmental Representative (Ld. Sr. DR) for the R....
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....ident. The assessee has also explained, the source of purchase stating that it is from, income generated from sale proceed of various shares sold on 14.07.2010, 20.07.2010, 26.07.2010, 30.07.2010 (Evident from the sale contact notes and ledger account of M/s. Sharukh N. Tara enclosed at paper page no.19 to 27, and such sale of sharesare already taxed in the relevant Assessment Year i.e. 2011-12, vide ITR and Computation of Income at paper book page no.28 to 30. Out of the sale proceeds, the shares of Tuni Textiles were purchased which is also evident from the contra ledger account of the Broker attached. Therefore, we note that assessee has explained the source of purchase of shares in a satisfactory manner. 12. The assessee held the shares for more than 12 months of the period which is evident through the below mentioned table. Script Name Purchase Date Sale Date Period of Holding in Months KGN 15.04.08 04.02.13 58 Tuni textile 04.08.10 15.05.12 21 Tuni textile 04.08.10 16.05.12 21 Tuni textile 04.08.10 28.05.12 22 Tuni textile 04.08.10 04.06.12 22 Tuni textile 04.08.10 05.06.12 22 The assess....
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.... assessing officer does not mention why he is not accepting these evidences. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. 13. Thus, the above-mentioned facts have been duly complied with in case of the assessee and thus, the assessee can duly claim exemption u/s 10(38) of the Act. The Hon'ble Gujarat High Court in the case of PCIT v. Champalal Gopiram Agarwal, R/TAXAPPEAL NO, 366 OF 2023 JULY 25, 2023, held that the Tribunal found that assessee had discharged the initial burden cast upon it under provisions of section 68. Shares of companies were purchased online, payments were made through banking channels, and shares were dematerialized. Additionally, the shares were transferred from the dematerialized account and received consideration through legitimate banking channels. The assessing officer did not have any independent source or evidence to show an agreement between the assessee and any other party to convert unaccounted money by taking the f....
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....t is reproduced below: "2. As submitted by learned senior advocate Mr. M.R. Bhatt for M.R. Bhatt and Co., the appellant revenue proposes the following substantial questions of law, which according to the submission requires examination. "Whether on the facts and circumstances of the case and in law, the decision of Appellate Tribunal is ex facie perverse because the Appellate tribunal deleted the addition of Rs. 2,10,474/- made on account of bogus long term capital gain, without appreciating the entire gamut of fact that the assessee transacted in penny stock namely M/s. Devika Proteins Ltd. thus earning bogus Long term Capital Gain and claiming it to be exempt under section 10(38) of the Income-tax Act?" 3. The assessee filed the return of income for the assessment year 2011-12 on 29-3-2012 declaring his total income Rs. 3,11,490/-. Subsequently the assessment was reopened as information was received that assessee has indulged into script of shell company and had claimed long term capital gain on sale of shares of Devika Proteins Limited to the tune of Rs. 2,10,474/- and that the amount was claimed as exemption under section 10(38) of the Income-tax Act,....
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....nder consideration. The Judicial discipline demands that once an order has been passed by the jurisdictional High Court, on a particular issue, lower authorities are duty bound to act in accordance with the same. 16. The Hon'ble, jurisdictional Gujarat High Court in the case of Mamta Rajivkumar Agarwal, Tax Appeal No. 408 of 2023, dated 11.09.2023 held that there was no evidence available on record suggesting that the assessee or his broker was involved in rigging up of the price of the script of M/s Shree Nath Commercial & Finance Ltd. The assessee had acted in good faith. The Tribunal, therefore, correctly held that the Assessing Officer had acted only on assumption which was misconceived. The Hon`ble, jurisdictional Gujarat High Court in the recent case of Shri Ambalal Chimanlal Patel, vide Tax Appeal No. 260 of 2024, dated 15.04.2024 held that both the appellate authorities, that is, "CIT(A) and ITAT" have taken into consideration the notice of contract memo placed on record by the respondent assessee with regard to the purchase and sale of shares and it is also found by the appellant that the respondent was holding shares of other fifteen companies and it has continued to h....