TaxTMI 
TaxTMI 
2025 (10) TMI 1410
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....in law in confirming the addition made by the AO on account amount received on sale of shares of Rs. 48,19,438/- treating the same as unexplained credits u/s 68 read with section 115BBE of the Income tax Act. 3. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the addition made by AO holding the Long Term Capital gain declared by the assessee, to be not genuine. 4. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the addition despite the assessee bringing on record all evidences and material to prove the genuineness of the transaction. 5. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the addition despite the sale and purchase transactions having been done through proper banking channels and as per the rules and regulations of the Stock Exchange. 6. On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming the addition by misinterpreting the financials of the companies whose shares were sold by th....
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....BE r.w.s. 10(38) of the Act of Rs. 48,19,438/- denying the assessee the benefit of Long Term Capital Gains u/s 10(38) of the Act. The ld. CIT (A) confirmed the addition made by the ld. AO relying upon the hypothesis propounded by the Ld.AO. While drawing his conclusions, the ld. CIT (A) placed reliance upon a catena of cases concerning penny stock transactions. 4. Per Contra, the ld. DR argued in favour of the order of the lower authorities. It was vehemently argued that M/s Kappac Pharma Ltd. is a penny stock company and that therefore the assessee has indulged in sham transaction and obtained bogus capital gains income. The Ld.DR further placed reliance, including through written submissions, upon a plethora of judicial pronouncements as supporting the case of the Revenue. 5. We have heard rival submissions in the light of materials available on record. The ld. Counsel for the assessee has vehemently argued that the relief accorded by the ld. First Appellate Authority is not based upon correct interpretation and understanding of the facts of the case. The ld. Counsel submitted that it had acquired 12,500 shares on 16.01.2013 of M/s. Kappac Pharma Ltd. through an off ma....
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....length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily 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 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 the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxe....
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...., prevailed upon the www.taxguru.in ITA 125/2020 and connected matters Page 9 of 10 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 observations made by the CIT (A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT (A) itself notes that the broker ....
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....present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiaries in these transactions merely as an investor who has entered in investment fray to make quick profit. Even the Assessing Officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. We observe that the Hon'ble Bombay High Court in the case of Pr. CIT v. Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04/03/2022 held as under: - "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in ....
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.... 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 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 the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the....
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.... 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 observations made by the CIT (A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT (A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT (A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judg....
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....se of this, it makes the script as suspicious and penny stock. We cannot agree to the above observation, merely because of huge profit, it does not make the script a penny stock. Further, it is fact on record that the financials of the company are not commensurate with the purchase and sale price in the market. The assessee has purchased the shares directly from the company and through share transfer from other party, subsequently, sold the same in the stock exchange. However, there is no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiaries in these transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human p....
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....issed with no order as to costs." 10. Further, the Hon'ble Delhi High Court in the case of Pr. CIT v. Smt Krishna Devi in ITA 125/2020 dated 15.01.2021 held as under: - ..................................................................................................................................................... .............................................................................................................................................. 11. Therefore, we respectfully follow the ratio of the above decisions. In this case also, the Assessing Officer and Ld. CIT (A) has applied the concept of Human probabilities and held the above said scrips to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon'ble Bombay High Court in the case of Ziauddin A Siddique (supra). Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to all....