TaxTMI 
TaxTMI 
2026 (5) TMI 819
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.... Limited amounting to Rs. 25,17,000/- u/s 68 of the Act, which is not penny stock. The said addition made is bad in law as all the basic conditions required to avail the benefit u/s 10(38) had been duly complied with by the appellant and was also in accordance with law. Further the addition of Rs. 1,00,680/- u/s 69 as undisclosed payment of commission was made which is completely based on assumptions and without any basis which is required to be quashed. Therefore, total addition of Rs. 26,17,680/- ( Rs. 25,17,000 + Rs. 1,00,680), u/s 68/69 of the Act was made by merely relying on the concept of preponderance of probability. The assessees submitted the source of the purchases of the shares before the assessing officer. The assessee also submitted the documents relating to sub-division (stock spilt) of the shares along with documentary evidence. The assessee has sold the shares of M/s. Tuni Textile Mills during the F.Y. 2011-12 and the transactions carried out by the assessee through Anand Rathi Securities Ltd, who is also a SEBI registered Stockbroker. The assessee submitted the contract note, the proof regarding payment of securities transactions, the sale amount of the shares wer....
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....broker and the same fact is evidenced form the copy of contract note, bank statement placed on record before. The assessee has also submitted the copy of the bills/contract note and the copy of the bank statements during the course of assessment proceedings in previous submissions. However the bill/contract notes of sale and purchase of shares along with bank statement is further placed on record herewith this submission for your ready reference at page no. 8 to 10. Those evidences are enough to substantiate the fact that the transaction of purchase and sale of shares of Tuni Textiles Mills Limited are not mere accommodation entry rather than normal purchase and sale transactions by the assessee as an investor. b) Assessee has relied on Annual Report of the Company: The assessee had purchased shares on 04.08.2010. The assessee is an investor in stock market and the said purchase was made on the basis of his self-analysis of the scrip on the basis of Annual Report for F.Y.2009-10. c) Assessee having better prospects in the scrip invested in the same: As stated above, the company was operating in manufacturing of textiles the projected for....
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....erial has been relied upon to even remotely suggest that the scrip 'Tuni Textiles Mills Limited' is penny stock. On perusal of the report, as reproduced in the draft assessment order, it is evident that there are certain peculiarities of penny stock companies such as syndicate members, fixed brokers, entry operators, purchase of share by beneficiary final sale by beneficiary, dummy directors etc who manipulate and control the price of the shares. In the present company none of the above attributes are proved by assessing officer since there is no mention of name of the broker of assessee through whom assessee purchase and sold shares of Tuni Textiles. There is no evidence/material/statement on record to suggest that the assessee or his broker was involved in the price manipulation or private placement of shares. Further, the syndicate of members of company and persons as alleged in statement reproduced in the draft assessment order was involved in preferential allotment of shares, where as the assessee had purchased the shares through the broker whose name was not involved in those manipulators. Further facts which establish that 'Tuni Textiles Mills Limited is....
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....TA No. 125 of 2020 dated 15.01.2021 held that long term capital gain earned by the assessee cannot be considered as bogus once the shares have been purchased through stock exchange, payments have been made through banking channel, and the sales have been routed from demat account and the consideration has been received through banking channels. The relevant observations of the Hon'ble Delhi High Court are as under: 11. On a perusal of the record, it is easily dissemble that in the instant case, the AD had proceeded predominantly on the basis of the analysis of the financials of Mis 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 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 AD 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." 5. However,....
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....the trading was done through software based platform wherein the trader does not have visibility on counter party buying/ selling. 6.8 The above issue has been dealt and adjudicated by many courts as under: Sri Chand Chatrumal HUF vs ACIT (ITA. No.6537/Mum/2015] "the assessee have fled the best evidence to prove the transaction in question viz: bills, contract notes, demat Statement and the bank account statements to prove the genuineness of the transaction relating in the purchase of Mis Panchshul Marketing Lid and thereafter sale of shares (after amalgamation of Mis KAFL which resulted in LTCG claim of Rs. 19,51,000. Therefore, by applying the test of preponderance of probability, the LTCG cannot be disallowed without AO pointing out any infirmities in the evidences produced by assessee, which it assessing officer could not point out. So the assessee's claim of LTCG need to be allowed." Manish Kumar Baid Vs ACIT [ITA 1237/Kol/2017] "The enquiry by the Investigation Wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not imp....
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....ty Kamla Devi S. Doshi Vis. The Income Tax Officer Ward 16(3)(1), I.T.A. No.1957/Mum/2015 Assessment Year: 2006-07 Bogus penny stocks capital gain: The s. 131 statement implicating the assessee is not sufficient to draw an adverse inference against the assessee when the documentary evidence in the form of contract notes, bank statements, STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error Shri Sunil Prakash V/s. ACIT -15(2) Ι.Τ.Α./6494/Mum/2014, Assessment Year: 2005-06 If the assessing officer relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68 There are other plethora of decisions as under on this very issue which are in favour of the assessee: * Prem P....
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....ndant, the order passed by the ld CIT(A) and stated that ld CIT(A) has passed a reasoned and speaking order covering all the aspects. The ld. Counsel reiterated the findings of the ld CIT(A) and stated that order of the ld. CIT(A) may be upheld. 11. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that assessee purchased 8,500 shares of 'Tuni Textile' on 04.08.2010 from the M/s Sharukh N Tara for the sum of Rs. 1,65,048.36/-, the details are given below: Particulars Amount Share Purchase Amount 1,57,250/- Security Transaction Tax 20.56/- Shares Transaction Expense 7777.80/- Total 1,65,048.36/- The assessee submitted copy of contract note received from M/s Sharukh N. Tara, vide paper book page no.14 to 15. Immediately after purchasing the shares a request letter regarding demat account details was duly sent to assessee by the Broker M/s. Sharukh N. Tara which is placed at paper book page no. 16. The assessee, also submitted Balance Sheet along with the Schedule of Investments for the financial year 2009-2010 wherein the Investment in shares o....
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.... 77,95,760 Grand Total (A+B) 82,02,300 1,62,250 1,95,755 80,06,545 * The details of other charges paid during the sale of shares is as follows: Security Transactions Tax Rs. 10,030/- Service Tax Rs. 4,950.14/- Share Transaction Expense Rs. 798.42/- Stamp Duty Rs. 798.42/- Total Rs. 16,577/- *the other charges are Evident from the Contract Note & Ledger attached herewith from page no.32 to 37. We find that assessee submitted a copy of Contract Note & Ledger, which is placed at paper book page no.32 to 37. A copy of bank statements reflecting the Sale of Shares i.e. Receipts as mentioned in the above table are attached from page nos. 38 to 40 of the assessee`s paper book. The assessee held shares of KGN and Tuni Textiles and sold the same shares which is evident from the copy of Transaction Statement from period 01.04.2012 to 31.03.2013, vide paper book page no.41 to 43. We find that assessee has submitted above Plethora documents and evidences to support the purchase and sale transaction, however, we note that assessing officer has not refuted or discredited these evidences and doc....
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.... by submitting the above documents and evidences, the assessee has proved that the transaction was done through the banking channel and that satisfied the condition mentioned in section 10(38) of the Act, moreover the period of holding is also 22 months. The Learned Counsel also submitted that in assessee's case no action has been taken by the Stock Exchange Board of India (SEBI) and there is no investigation report of the SEBI. 14. We note that Hon`ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai, [2022] 142 taxmann.com 247, held that where Assessing Officer noted that assessee had indulged in scrip of shell company and had claimed long term capital gain on sale of shares and made addition under section 68 holding that entire transaction was bogus and in the nature of penny stock, however, since genuineness of investment in shares by assessee was substantiated by him by producing copy of transaction statement for period from 1-6- 2001 to 1-10-2010 and shares were retained for more than ten years and were sold after such long time, hence investment was not bogus therefore it cannot be treated that investment was made in penny stock. The fin....
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.... The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span. 6. The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was longstanding and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed. 6.1 On the facts of case, no question of law much less substantial question of law arises. 7. Resultantly, appeal is dismissed". 15. We note that Judgment of Hon`ble Calcutta High Court in the case of Swati Bajaj and others (supra), referred by learned DR for the revenue, should not be applicable to the assessee, as it is outside the territorial jurisdiction of Gujarat. However, the Judgments of Hon`ble Jurisdictional High Court of Gujarat a....