TaxTMI 
TaxTMI 
2026 (6) TMI 600
X X X X Extracts X X X X
X X X X Extracts X X X X
....eassessment proceedings initiated solely for reappraisal of material already examined in the original assessment under Sections 153A/143(3), constituting an impermissible change of opinion, hereby violating the settled legal principle that reassessment cannot be initiated on the same set of facts. 4. The Ld. CIT (A) failed to appreciate that the reasons recorded for reassessment were based on borrowed satisfaction from third party investigations and lacked independent application of mind by the AO. Further, the approval granted under Section 151 was mechanical rendering the reassessment proceedings void ab initio. 5. The Ld. CIT (a) failed to consider that reassessment was initiated based on incorrect assumptions, particularly stating that LTCG was not disclosed, whereas the same had been duly declared in the return, thereby vitiating the reassessment proceedings entirely. 6. The Ld. CIT (A) erred in confirming the addition without considering that the AO failed to dispose of the appellant's objections through a reasoned and speaking order, violating established procedural norms and principles or natural justice, 7. The Ld. CIT (A) gravely er....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... transactions were genuine. 16. The Ld. CIT (A) erred in sustaining the interest levy under Section 234B, which is unjustified and merely consequential, warranting deletion. 17. Without prejudice, the Ld. CIT(A) erred in confirming penalty proceedings under Section 271(1)(c), despite the absence of any factual or legal basis, making the initiation of penalty proceedings arbitrary and unwarranted." 2. At the time of hearing ld. AR of the assessee has not pressed grounds no.4, 6, 7, 8, 9, 12 & 14, hence the same are dismissed as not pressed. 3. Brief facts of the case are, the assessee is an individual deriving income from house property, business and profession and other sources. The assessee filed return of income for the year under consideration declaring income of Rs. 7,21,590/- and assessment under section 153A r.w.s. 143(3) of the Income- tax Act, 1961 (for short 'the Act') was completed on 20.12.2018 at assessed income of Rs. 7,21,590/-. 4. In this case, AO received information from internal sources, based on the information available and enquiry conducted by the AO, the reason to believe for reopening u/s 148 was recorded and after obtaining approva....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arted rising and reached a maximum of Rs. 108.6 on 27.10.2014 i.e. an increase of 1643% in Just within one and half year period. Further, AO observed that even though its trade chart for four years shows that it had a tendency of trading on a low rate with low volume, then through circular trading it started rising slowly with low volume. After a high rate, it started falling heavily with very huge volume. He further observed that the analysis of the share trading pattern also revealed that the shares were sold in small quantities so as to rig the prices as per the requirements of the beneficiaries. He observed that these are the typical indicators of a penny stocks involved in providing bogus accommodation of ITCG. AO observed that the assessee has been shown to be one of the beneficiaries of bogus LTCG. As per the trading data of the script obtained from the BSE, AO observed that the assessee has sold 20000 shares of PRITI MERC (now known as PMC Fincorp Ltd.) worth Rs. 73,79,750/- from 11.10.2012 to 15.10.2013. For the same, AO reproduced the relevant portion of the statement of the concerned person i.e. Shri Pardeep Jindal in the assessment order. The AO further reproduced the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing in a penny stock was neither the result of a coincidence nor of a genuine investment activity but were created through well planned and executed scheme in which the company, the brokers and the buyers and sellers of the scrips worked in tandem to achieve the pre-determined objectives. 8. AO observed that accordingly, from the trading pattern of assessee and the way the share prices have been manipulated, AO was of the view that the assessee in connivance with certain entry operators have misused the stock exchange system to generate fictitious LTCG and thereby have avoided payment of legitimate taxes and the entire transaction is a sham and the genuineness of the transaction is thus disproved. Hence, the amount of Rs. 73,79,750/- i.e. the sale consideration so received from the sale of shares was added back to the income of the assessee as unexplained credits u/s 68 of the Act 9. Aggrieved assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. Ld. CIT (A) after going through the submissions of the assessee sustained the additions. 10. Aggrieved with the above order, assessee is in appeal before us. 11. At the time of hearing, ld. AR of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the Appellant has clearly discharged the onus cast upon him under the Act to establish the genuineness of the impugned share transactions. Despite this, the Ld. AO has completely disregarded these documents and has solely relied upon the statement of Mr. Raj Kumar Modi, Director of M/s PMC Fincorp Ltd., recorded during search, without appreciating the fact that the same has already been retracted by him vide retraction letter dated 22.10.2018.(Pg. no. 242-244 of PB). 2. The scrip of M/s PMC Fincorp Limited continues to remain listed and actively traded on the recognized stock exchanges. The continued listing and trading status of the said scrips clearly establishes the legitimacy of the transactions undertaken by the appellant in the ordinary course of investment. There is no adverse action by SEBI or stock exchange declaring the entity as penny stock operator or restricting trading in the said scrips. In the absence of any such regulatory finding, the transaction carried out by the appellant on the stock exchange, through registered broker after payment of STT cannot be treated as non-genuine transaction. The current trading status of the said scrips can easily....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not violative of any fraudulent activity under Regulation 3 and 4 of the PFUTP Regulations. 19. Consequently, we are of the opinion that the material on record does not establish any violation of Regulations 3 and 4 of the PFUTP Regulations by the appellants through their trading in the scrip of the Company. The impugned order is accordingly quashed. The appeals are allowed with not order as to costs." 5. Holding period of over 1.5 years establishes investment intent and justifies price appreciation. The appellant had purchased the said scrip in Aug'2011 at a price of Rs. 30/- per share and sold the same in Oct' 2012 at price of Rs. 511.75/- and in Feb'2013 at an average price of INR 223/-, thereby holding them for a period of more than 1.5 years. The appreciation in share price over such period is a reasonable outcome in equity market and cannot be termed as abnormal or suspicious itself. Hence, the gain is a result of market-driven factors over a reasonable period and not due to any artificial or sudden hike. The details of the shares sold are as under: Dates Particulars Scrip No. of shares Amount (In INR) 05.08.2011 Off market pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was no reason to add capital gains as unexplained cash credit under section 68 of the Act. Accordingly, the addition of Rs. 66,56,020/- is deleted." 12. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 13. Considered the rival submissions and material placed on record. We observed that the AO had made the addition on the basis of search conducted on the PMC Fincorp Ltd and based on the material found and statement recorded by Mr. Raj Kumar Modi, director, who had admitted on oath u/s 132(4) of the Act that he has rigged and managed the prices and also provided accommodation entries. We noticed that the assessee had also purchased the shares from the off market and sold the same in the stock market. Meantime, the AO had heavily relied on the increase of price during the period, and the investigation report came to conclusion that the scrip dealt with by the assessee is penny stock and the same is deserved to be added as income of the assessee. However, the assessee has filed all the relevant documentation to prove that all, including purchase and sale, the transactions are conducted through the banking channel along with the contract ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inancials 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 alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. but that does not help the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 pre-planned manner to evade t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, 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 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 reaso....