TaxTMI 
TaxTMI 
2026 (5) TMI 1052
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.... 2. The Ld. CIT(A) failed to appreciate that the reassessment proceedings initiated vide notice dated 30.03.2021, was issued beyond the permissible limitation under the then applicable Section 149(1)(b), and therefore barred by limitation and void ab initio. 3. The Learned CIT(A) failed to appreciate that the reassessment was based solely on generic investigation reports alleging penny stock misuse and not on any independent tangible material or inquiry relating to the assessee's transaction, rendering the reopening bad in law and without valid "reason to believe." 4. The Ld. CIT(A) failed to appreciate that the AO without making any enquiries simply relied mechanically on the findings of the Investigation Wing in making addition of Rs. 20,97,140/-. 5. The Ld. CIT(A) wrongly upheld the addition of Rs. 20,97,140 under Section 69A though the transactions were duly recorded in the demat and bank accounts and disclosed in the return and since there is no finding of unexplained or unaccounted money the essential conditions for invoking Section 69A are not met. 6. The Ld. CIT(A) erred in confirming the denial of short-term capital gains ign....
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....al in nature for which relevant facts are stated to be emanating from the existing records. 5. The brief facts of the case are that the assessee is an individual who filed her return of income for Assessment Year 2013-14 on 06.03.2014 declaring total income of Rs. 32,28,850/-, which included short-term capital gain of Rs. 10,43,677/-. During the year under consideration, the assessee had purchased 40,000 shares of M/s. Vandana Knitwear Limited for a total cost of Rs. 20,00,850/- and sold 20,000 shares for a consideration of Rs. 20,97,140/-, claiming cost of acquisition at Rs. 10,50,511/- and securities transaction tax ("STT") of Rs. 2,952/-. Accordingly, the assessee offered short-term capital gain of Rs. 10,43,677/- under section 111A of the Income Tax Act, 1961 ("the Act"). Subsequently, based on information received from the Investigation Wing, Hyderabad, that M/s. Vandana Knitwear Limited was a penny stock company and that the assessee was one of the beneficiaries, the Learned Assessing Officer ("Ld. AO") reopened the assessment of the assessee under section 147 of the Act and issued notice under section 148 dated 30.03.2021. In response, the assessee filed return of income ....
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.... evidencing the transactions. The Ld. AR contended that the lower authorities have not pointed out any discrepancy in the documentary evidences filed by the assessee. The Ld. AR further submitted that the allegation of the Ld. AO that the assessee had introduced unaccounted money in the garb of capital gains is not supported by any material evidence. It was submitted that no evidence has been brought on record to show movement of cash from the assessee to any broker or entry operator. It was also submitted that no person has named the assessee as a beneficiary of any bogus transaction or price rigging. The Ld. AR placed reliance on the decision of the Raipur Bench of the Tribunal in the case of Mohammad Anish Hingora Vs. ITO, reported in 175 taxmann.com 65, wherein under similar facts, the issue was decided in favour of the assessee. Accordingly, the Ld. AR submitted that the addition made by the Ld.AO is liable to be deleted. 9. Per contra, the Ld. DR relied on the orders of the lower authorities. It was submitted that the Investigation Wing, Hyderabad had conducted detailed enquiry and found abnormal fluctuations in the share price of the company. It was submitted that in Fina....
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....ntion raised by the Ld. AR is that the assessee's name was not mentioned in the investigation report which is relied upon by the revenue or in the statement of alleged entry operators, further there was no allegation or evidence brought on record by the revenue to establish that the assessee concerned, or his broker was involved in the alleged price rigging, while undertaking the transactions of purchase/ sale of the impugned shares. On this issue, reliance has been placed on the following judgments: Principal Commissioner of Income-tax v. Smt. Renu Agarwal [2023] 153 taxmann.com 578 (Allahabad) 5. After detailed discussion, the ITAT has recorded the following findings of facts: "The above findings recorded by Id. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the ld. CIT(A) has specifically that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange by the company whose shares were involved in these transactions, and he held that Assessing Officer only quoted facts pertaining to various ....
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....atement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee." 3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income-tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant. 4. We take notice of the fact that the assessee has a Demat Account maintained....
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....nd Gujarat High Court also have dealt with the similar issues and has dismissed the appeal filed by the Revenue. The appellant (Revenue) had preferred SLP against an order of Gujarat High Court passed in the case of the Principal Commissinoer of Income Tax-I v. Parasben Kasturchand Kochar [2021] 130 taxmann.com 176, passed in R/TAX Appeal No.204 of 2020 decided on 17.09.2020), which has been dismissed in limine upholding the orders passed by the Gujarat High Court. The Apex Court in the case of Principal Commissioner of Income Tax v. Smt. Krishna Devi [2021] 126 taxmann.com 80/279 taxman 148/431 ITR 361 (Delhi). decided on 15.01.2021 has held that the High Court has erred by holding that the addition made under Section 68 of the Act by treating impugned Long term Capital Gain (LTCG) as bogus was unjustified and same was to be deleted. Principal Commissioner of Income-tax v. Mamta Rajivkumar Agarwal [2023] 155 taxmann.com 549/295 Taxman 512 (Gujarat) 4. Hence, the Tribunal held, and in our opinion rightly so 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 Na....
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....sactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce & Ind. Ltd., assessee's account with P.K. Agarwal & co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary ofNSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of lon....
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.... were sold by the assessee at an average of Rs. 300.47 per share for Rs. 36,05,644/-, the investments are disposed off in parts on 07.06.2011 (3000 shares @277.55 per share), 07.07.2011(3000 shares @317.07 per share) & 09.07.2011(6000 shares @303.63 per share) and have obtained capital gain of Rs. 31,62,724/- (Rs. 36,05,644 - Rs. 4,42,920) i.e., 714% on the cost of investment. 17. Similarly, 60,000 shares of 'Praneta' are purchased on 12.01.2010 for Rs. 4,24,200/- i.e., @ Rs. 7.01 per share, these shares were sold by the assessee @ an average of Rs. 63.77 per share for Rs. 38,26,217/-, the investments are disposed of in parts on 07.06.2011 (30000 shares @62.36 per share), 07.07.2011(6000 shares @63.05 per share) & 14.07.2011(24000 shares @65.71 per share) and have obtained capital gain of Rs. 34,02,017/- (Rs. 38,26,217- Rs. 4,24,200) i.e., 801.98% on the cost of investment. 18. From the above facts, it is emanating that the assessee has sold the shares of aforesaid companies within a span of approx. 1 year 5-6 months and have attained a profit of 700% to 800%, which prima facie has been exorbitant. The aforesaid facts are duly acknowledged by the assessee during his s....
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....n Hon'ble Mumbai HC in the case of Ziauddin A. Siddique (supra) have affirmed the findings of Tribunal that if the transaction of purchase / sales of shares of the alleged penny stock is done through stock exchange and through registered stock brokers, the payment is made through banking channel and the Stock Transaction Tax (STT) has been paid, the Assessing Officer has not criticised the documentation involving the sale / purchase, also there is no allegation against the assessee that it has participated in any price rigging in the market on the impugned shares. 24. Similar findings are accorded by Hon'ble Gujarat HC in the case of Mamta Rajeev Kumar Agrawal (supra), wherein their lordships have observed that, if there is no evidence available on record suggesting that the assessee or his broker was involved in rigging up of the price of the impugned script, the assessee had acted in good faith, then the action of Assessing Officer was only on assumption and misconceived. 25. Hon'ble MP High Court in the case of Nilesh Jain HUF (supra), have held that mere sudden increase in share price on the stock exchange does not ipso facto determine that the shares are bogu....
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....nts are not genuine are pointed out by either of the authorities below. There was an allegation that the assessee failed to discharge the burden cast upon him, however, no explicit observation specifying the fault on the part of assessee in discharging of burden which the assessee was unable to furnish could be brought on record. 30. Ld. CIT(A) also relied on the doctrine of preponderance of human probabilities, placing reliance on certain judicial pronouncements, thus have observed that the rise in price of the share was artificially done by adopting the manipulative practices, the assessee was failed to prove that there was no manipulation, and the gains assessee has reaped was not tainted. It is further observed that the Assessing Officer has adopted an inferential process which is followed by a reasonable and prudent person, Ld. AO culled out proximate facts, considered the surrounding circumstances as enlightened by investigation wing, assessee's conduct, the time between the buy and sale operation and also the sudden and steep rise in the price of shares of the impugned company, whereas the general market trend was admittedly recessive. The aforesaid conviction of the ....
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...., Gujarat, Punjab & Haryana, and Rajasthan High Courts, holding that in the absence of any evidence to show involvement of the assessee in price rigging or bogus transactions, the addition cannot be sustained merely on the basis of suspicion. In the present case also, no evidence has been brought on record to show that the assessee was involved in manipulation of share prices or that the transactions were non- genuine. Further, no person has named the assessee as a beneficiary of any bogus accommodation entry. In view of the present facts and respectfully following the decision of the Raipur Bench of the Tribunal in the case of Mohammad Anish Hingora Vs. ITO (Supra), we are of the considered view that the Ld. AO was not justified in treating the entire sale proceeds of Rs. 20,97,140/- as unexplained income under section 69A of the Act. Accordingly, we direct the Ld. AO to delete the addition made under section 69A of the Act and to treat the profit arising on sale of shares as short- term capital gain under section 111A of the Act. 12. Since we have decided the issue in favour of the assessee on merits, we do not propose to adjudicate the other grounds raised by the assessee, in....