TaxTMI 
TaxTMI 
2026 (5) TMI 1417
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....ion), Unit-1(3), Mumbai, that the assessee had carried out transactions in penny stock of M/s. G.S. Auto International Ltd. amounting to Rs. 2,82,991/-. Based on the said information, the case was reopened by issuance of notice under section 148 dated 28.03.2018. In response thereto, the assessee requested that the original return filed on 01.10.2011 be treated as return filed in response to notice under section 148 of the Act. Thereafter, notices under sections 143(2) and 142(1) of the Act were issued and complied with. 3. During the reassessment proceedings, the Assessing Officer observed that the assessee was engaged in trading in future and options, long term capital gains, short term capital gains and income from other sources. The assessee furnished ledger account, demat statement, computation of income, broker details, Form 10DB and other documents. On verification thereof, the Assessing Officer noticed that the assessee had purchased 10,000 shares of G.S. Auto International Ltd. in three tranches aggregating to Rs. 2,98,533/- and subsequently sold the same on 07.01.2011 for Rs. 2,82,196/- resulting into loss of Rs. 16,337/-. 4. The Assessing Officer referred extensive....
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.... that the assessee had derived any unaccounted benefit. 7. The assessee further submitted before the Ld. CIT(A) that during the year under consideration, he had earned long term capital gain of Rs. 8,81,02,170/- on sale of residential house and had paid taxes amounting to Rs. 1,86,00,000/- before filing return of income and therefore there was no occasion or motive to enter into manipulative transactions merely to incur insignificant loss of Rs. 16,337/-. It was also contended that the Assessing Officer had merely relied upon generalized findings of the Investigation Wing without conducting any independent enquiry against the assessee. 8. The Ld. CIT(A), after considering the assessment order, submissions and evidences furnished by the assessee, deleted the addition made by the Assessing Officer. The relevant findings of the Ld. CIT(A) are reproduced as under: "6.2 During the appellant proceedings, the appellant has submitted that it is in the business of buying and selling equity shares through a broker registered in Bombay Stock Exchange and National Stock exchange. Further, the appellant has submitted that it has audited its books of account for the year under con....
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.... respect of transactions of some penny stock companies carried out at NSE and BSE, which was found to be controlled by some hawala Traders, used either for giving artificial gain in the form of LTCG/STCG or STCL to the beneficiaries as per their requirements to evade tax and assessee was found to be one of such beneficiary, who has traded in the penny script, M/s. GS Auto International Limited, used to bring his unaccounted money, into his books in the guise of Capital Gain/Loss. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,82,196/- from the sale of the scrip of GS Auto International Limited, which involved the series of preconceived steps and lack of commercial content and totally an artificially structured transaction entered into with the sole intent to evade taxes. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has not considered the nature of the transactions executed by the assessee and accepted the documentation presented by the assessee at face value, without adequately considering the underlying fraudulent intent and the orchestrated steps tak....
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....herefore the entire allegation of introducing unaccounted money into books of account was wholly illogical and contrary to facts on record. The learned AR invited our attention to the details placed in the paper book page No. 3 as reproduced below: Sr. No. Name of Scrip Date of Transaction Nature of Transaction Quantity of Shares Average Price per Share (Rs.) Amount (Rs.) 1 G.S. Auto International Ltd. 12.04.2010 Purchase 2,000 40.05 80,102.36 2 G.S. Auto International Ltd. 16.06.2010 Purchase 2,000 27.77 55,557.46 3 G.S. Auto International Ltd. 02.07.2010 Purchase 6,000 27.16 1,62,986.18 Total Purchase Cost 10,000 Average Price : 29.86 2,98,646.00 4 G.S. Auto International Ltd. 07.01.2011 Sale 10,000 28.21 2,82,196.42 Net Loss 16,450.00 12. The learned AR further submitted that the assessee had already paid taxes amounting to Rs. 1,86,00,000/- on long term capital gain arising from sale of residential property and therefore there was no reason for the assessee to indulge in mani....
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....e of Pr. CIT vs. Swati Bajaj and the decision in the case of Manoj Jain (HUF), which was subsequently affirmed by Hon'ble Calcutta High Court and the Hon'ble Supreme Court. However, in our considered view, the facts of the present case are clearly distinguishable from the facts involved in the aforesaid decisions. In those cases, the assessees had claimed exempt long term capital gains arising from abnormal appreciation in penny stock scrips and the authorities had found overwhelming material demonstrating pre-arranged transactions intended to convert unaccounted income into exempt capital gains. In the present case, admittedly, the assessee has not claimed any exempt long term capital gain or artificial tax-free income from the impugned transactions. On the contrary, the assessee has actually incurred loss of Rs. 16,337/- in the transactions of shares of G.S. Auto International Ltd. Further, the assessee has furnished complete documentary evidences including contract notes, demat statements and banking records in support of the transactions and no material has been brought on record by the Assessing Officer to establish that the assessee had received any corresponding unaccounted ....