TaxTMI 
TaxTMI 
2026 (5) TMI 1260
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....the Act was issued on 17.02.2017 followed by notices u/s 142(1) alongwith questionnaire from time to time. The AO noticed that assessee has entered into security transaction of INR 11,12,97,473/- as per the STT return available with the Department and paid 0.1% STT on the said transaction. Since no income was declared with respect to such security transaction in the return of income filed, the AO asked the assessee to explain the reasons for the same. The assessee submits that during the year under appeal, he has earned LTCG of INR 10,78,90,609/- from the sale of equity shares of Yamini Investment Company Ltd. ["YICL"] and since the LTCG on the same was exempt u/s 38 of the Act, therefore, this transaction was not disclosed in the return of income filed. Thereafter, AO made no inquiries or verification of the transactions and based on the investigation carried out by Investigation Wing and order of SEBI with respect to YICL, AO alleged that the company YICL is a penny stock company and held that the transaction of sale of shares of YICL is not real but sham transaction. Accordingly, LTCG of INR 10,78,90,609/- claimed as exempt was held as unexplained credits and made the addition u....
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....hares of YICL in the swap ratio of 10:8 and post-amalgamation, assessee had 25 Lakhs shares of YICL. These shares were hold by the assessee in his DEMAT account with M/s Religare Securities Ltd. During the year under appeal, assessee has sold shares through member brokers i.e. M/s. Religare Securities Ltd. and M/s. Shri Parsaram Holding Pvt. Ltd. through recognized stock exchange. 9. The assessee further filed copies of sale invoices issued by the respective brokers alongwith the copy of Form 10DB in respect of the STT paid. The assessee further filed copy of bank statement and copy of ledger accounts of the assessee in the books of both the brokers confirming the sale of shares and credit of receipts in his bank accounts. The assessee further submits the copy of DEMAT account statement from where said shares were transferred. Copies of all these documents filed before the lower authorities alongwith respective submissions are placed at pages 11 to 147 of the Paper Book filed before us. 10. Ld.AR for the assessee further submits that purchases of the shares of ACTL were through preferential allotment and sales was made through recognized stock exchange and SEBI regulated inte....
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....ain the accommodation entry of bogus LTCG deserves to be deleted. 13. On the other hand, Ld. CIT DR heavily placed reliance on the judgment of the lower authorities and submits that assessee has not shown exempt income in ITR filed therefore, the credits received from the sale of the shares of YICL remain undisclosed and unexplained. Ld. CIT DR further submits that Ld. CIT(A) had discussed this issue at length and in para 5 of its order, has observed that assessee has failed to establish the genuineness of the transactions of the sale of the shares of YICL. Ld. CIT DR submits that on comparison of the prices of the shares of YICL, it could be seen that there was substantial increase without any basis and financial strength of the company is also doubtful which has been discussed by the AO at page 5 to 89 of the order. 14. Ld. CIT DR submits that the lower authorities have been able to establish that the sale of shares of YICL is a sham transaction and therefore, requested for the confirmation of the addition so made by the lower authorities. 15. In re-joinder, Ld. AR submits that merely for omission of disclosing the exempt income in the return of income filed, the genuine....
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....er of fact that investment in shares of ACTL which were later merged with YICL is not the solitary transaction carried out by the assessee in shares and securities rather he is a regular investor and having large investment which is evident from the copy of DEMAT account statement filed before us. However, the AO except making bald statements with respect to the genuineness of the transaction carried out by the assessee and holding the same as sham transaction without bringing out on record any material quoted by making independent inquiry or investigation which could suggest that the assessee has entered into transaction of sale of share through the alleged inter-mediaries for obtaining accommodation entries of LTCG. The shares were sold through registered broker and the assessee has paid STT which fact has not been denied. Under identical circumstances in the case of Sujit Madan vs DCIT (supra), the Co-ordinate Bench of ITAT, Delhi has held the transaction in shares of YICL is genuine. The relevant observations of the Co-ordinate Bench as contained in para 10-15 are as under:- 10. "We find that the lower authorities brushed aside the submissions and all the documents fil....
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.... of SEBI enquiry was from Sept 2013 to Jan 2014, whereas the assessee sold shares in June 2015 and Feb 2016. Nowhere the assessee's conduct fall under any of the adverse effects reflected in the order of SEBI. Hence the reliance placed on the order of SEBI does not come to the rescue of the revenue in the peculiar facts and circumstances of the instant case. 12. The ld DR vehemently placed reliance before us on the decision of the coordinate bench of Mumbai Tribunal in the case of Aakruti Ketan Mehta vs ITO in ITA No. 53/Mum/2023 for AY 2014-15 dated 31.01.2024 wherein, the Tribunal had made a passing observation in para 30 that the SEBI had adjudicated and found that the entire trading of the shares in the stock market qua scrip of Sunrise Asian Ltd was only a plot to provide accommodation entry to certain parties who had approached them to provide accommodation entry. The Tribunal also had held that even though there cannot be any direct evidence against the assessee but all these entries had cast a shadow of test of genuineness of the transaction which requires juridical frown and condemnation. Further, the Tribunal had also placed reliance on the decision of the Hon'bl....
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....15 per share and Rs. 30.85 per share. This is classic case of assessee falling in the category of gullible investor who had been hit by the declining market prices due to alleged manipulation and artificial rigging of share prices carried out by some 3rd party who are totally unconnected with the assessee. Hence, in our considered opinion, reliance placed on the decision of the Mumbai Tribunal would not come to the rescue of the revenue. Further, we find our view is further fortified by the decision of the Hon'ble Jurisdictional High Court in the case of PCIT Vs. Smt Krishna Devi reported in 431 ITR 361 (Del); decision of the Hon'ble Allahabad High Court in the case of PCIT Vs. Smt Renu Agarwal 153 taxmman.com 578 and decision of the Hon'ble Madhya Pradesh High Court in the case of CCIT (OSD) Vs. Nilesh Jain (HUF) 163 taxmann.com 229, among others. Now we are left with a situation wherein, the Hon'ble Jurisdictional High Court has decided in favour of the assessee and some non-Jurisdictional High Court had given divergent views. When there is a decision of Hon'ble Jurisdictional High Court, the same would prevail over other High Courts, Tribunal and this Tribunal need not take cogn....
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.... way assessee got 2,00,000 shares and the same were also converted by merger / amalgamation following Bombay High Court order into 1,60,000 shares of Yamini Investments Company Ltd (Yamini). In this regard, assessee has placed on record 'allotment letter, bank statement' highlighting the payment made towards purchase of the said shares and also placed on record the order of Hon'ble High Court by which the company M/s Anax Com Trade Ltd was merged with Yamini Investments Company Ltd., which are at paper book page No. 51 to 95. 6. However looking at the market volatility and better returns, the assessee sold equity shares at recognized Bombay Stock Exchange (BSE) through broker IIFL securities Ltd and Arcadia Share & Stock Broker Pvt Ltd at various rates after paying STT, the details of which are contained herein below: SN Date of Sale Trade Rate Quantity Amount STT 1 24-07-15 50.75 10,000 5,06,993 508 2 14-06-15 56.25 20,000 11,23,875 1,125 3 25-06-15 58.60 10,000 5,85,414 586 4 26-06-15 58.75 20,000 11,73,824 1,173 5 29-06-15 58.90 15,000 8,82,616 884 6 30-06-1....
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....res of Anax Com Trade Limited were converted into shares of Yamini Investments Company Limited in Demat account as per the scheme of merger. We also noticed that all the transactions were being carried out through SEBI registered stockbrokers and Members of BSE, a recognized stock exchange of India and through Scheduled Commercial Banks. Since the assessee had complied with all the terms and conditions of section 10(38) i.e. shares are held by the assessee for more than 12 months (approx. 28 Months), paid STT of Rs. 9,191/- at the time of sale, transaction is being carried out through recognized stock exchange in India as per procedure by SEBI and even the rates are not decided by any of the parties, but by open market on demand and supply basis. Thus it cannot be said that the above transactions are a bogus transaction ignoring the facts and documentary evidences available on record. 12. It is also hereby important to note that the transactions were carried out in an open market and in a recognized stock exchange hence prices of shares are not controlled / managed by the assessee. Similar view has also been taken by the Coordinate Bench of ITAT in the case of ITO-(24)(3)(....
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....e shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers and the shares were received directly from the company and then dematerialized and on sale, the D-mat shares were delivered to the clearing corporation of BSE through its share broker. However, the AO denied the claim of long-term capital gain on sale of shares u/s 10(38) of the Act and made addition of LTCG u/s 68 of the Act. Whereas, the shares had been directly allotted by the company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. Thus, possession of the shares were not in doubt at all because the same were also reflected in the D-mat account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit. From the material facts on there was no evidence or any whisper on record that some unaccounted money had been routed. Thus, in our view there is absolutely no case made out by the revenue for justifying the denial of exemption u/s 10(38) o....
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....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 share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the allege....
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....ransaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at 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 Responden....
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....T after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the 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. ....
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....pplied 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 allow the ground raised by the assessee. Accordingly the grounds raised by the assessee are allowed. 12. In the result, appeal filed by the assessee is allowed. 13. With regard to appeal for AY 2016-17, since the facts are exactly similar except change in scrips bought and sold by the assessee i.e. Yamini Investment Pvt. Ltd. and Goenka Business & Finance Ltd. to AY 2015-16 our above findings in AY 2015-16 are applicable mutatis mutandis in AY 2016-17. Accordingly, the appeal being ITA No.2531/Del/2022 for AY 2016-17 filed by the assessee is allowed." 20. Similar view has been taken by various Co-ordinate B....