TaxTMI 
TaxTMI 
2026 (6) TMI 597
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....ction 148 notice dated 19.03.2024 was within limitation. He failed to appreciate that the extended 10-year period under Section 149(1)(b) was not available, as the search unearthed no asset representing escaped income over 50 lakh for AY 2015-16. 3. That the learned CIT(A) wrongly upheld the reopening despite material procedural lapses. In particular, the Assessing Officer did not provide the assessee a copy of the Principal CIT's sanction obtained under Section 151, and the sanction itself appears to have been given mechanically, without due application of mind, vitiating the validity of the notice. 4. That the learned CIT(A) was not justified in rejecting the objection to the Section 143(2) notice. The scrutiny notice was issued in a legally improper manner, and this procedural illegality tainted the reassessment proceedings an aspect the CIT(A) failed to ab initio address. 5. That the learned CIT(A) erred in law by upholding the reassessment even though the Assessing Officer never disposed of the assessee's objections to reopening with a separate speaking order (as mandated by the Supreme Court in GKN Driveshafts). This omission violated f....
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....e transactions, despite both being of similar nature 12. That the learned CIT(A) has further erred in law by confirming the AO's decision of charging tax under Section 115BBE at the punitive rate for the year under appeal, which is not legally sustainable. 13. That the learned CIT(A) ought to have held the penalty proceedings invalid. The Assessing Officer's boilerplate initiation of penalty under Section 271(1)(c) - without a clear finding as to concealment or furnishing of inaccurate particulars in the assessment order was mechanical and legally unsustainable. 3. We have heard both the sides, perused the material on record, written submissions filed and the case laws cited before us. 4. The AO mentioned that submission of the assessee has been perused and verified from the record. The Assessing Officer noticed that during the period relevant to assessment year under consideration, the assessee has shown LTGC of Rs.31,60,76,674/- on sale of script of Svaraj Trading & Agencies Ltd.(STAL). Further, the LTCG has been claimed exempted u/s 10(38) of the Act. The Assessing Officer further stated that on perusal of the details of LTCG, it is evident that t....
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.... certain prescribed circumstances. However, the prescribed conditions of section 149(1)(b) of the Income Tax Act were never met. Proceedings u/s 148 of the Income Tax Act for the assessment year under appeal as well as for three mandatory Assessment Years 2021-22 to 2023-24 were initiated in accordance with the new procedure of search assessments applicable for search actions carried out after 01.04.2021. The AO never referred to any seized documents, or recorded statements of the appellant or his associates that unearthed undisclosed income for the year under consideration. However the AO without rebutting the reply proceeded to made addition by rejecting appellants claim of exemption u/s 10(38) of the Act. 4.2.1 The Ld. AR argued that the AO lacks jurisdiction in issuing Notice u/s 148 of the Income Tax Act, and therefore, the order passed by the Ld. Assessing Officer is without jurisdiction. The Ld. AR contended that the finding of the AO, as confirmed by the Ld. CIT(A) suffers from gross legal, factual and procedural infirmities like non supplying of copy of approval of the competent Income Tax Authority, required to be obtained before issuing Notice u/s 148, Non disposal of....
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....ency of such reasons cannot be questioned in appeal unless the action is found to be perverse or legally impermissible. Accordingly, the reassessment proceedings initiated are valid and legal, and the ground of appeal challenging the reopening of assessment is dismissed." 5.2. The Ld. Counsel for the appellant has argued that no incriminating material was found and seized during the search conducted on the appellant and his group (Miraj Group) on 21.02.2023 either in the form of any papers, or digital data suggesting that the reported share transactions of Assessment Year 2015-16 were bogus that leads to any unaccounted income. The Panchnama (APB Pgs. 1048-1057) and seized records during the search (as acknowledged in the assessment order) contain nothing relating to these Long-Term Capital Gain [in short ("LTCG")] transactions. The Ld. AR argued that since no fresh tangible material was found in search, hence reopening of the assessment is impermissible and it would tantamount to review of past records. The Supreme Court in Pr. CIT (Central) v. Abhisar Buildwell (P) Ltd. [2023] 149 taxmann.com 399 (SC), emphasized that if no incriminating material is found in a search,....
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....ments relied by the appellant in support and he did not file any contrary judgment in defense in the given set of peculiar facts of the present case. 5.4 The Ld. AR for the appellant has filed a rejoinder of 27 pages in the rebuttal to the written submissions filed by the Ld. DR. The AR has submitted that the Ld. DR in his reply has merely reproduced the finding given in the assessment order and the CIT(A) order, without any independent analysis or interpretation based on any cogent evidence. The Ld. AR further submitted that the DR has failed to bring any corroborative evidence or legal proposition to controvert the detailed legal and factual submissions made by the appellant assessee. The Counsel has vehemently argued that what is narrated by Ld. DR in his written submissions is essentially a reiteration of the same finding of the Ld. CIT(A) which is untenable under the law as had been already explained with a detailed comprehensive written submission filed on record. 5.4.1 The AR has stated that from the written submissions of the Ld. DR and from the record, it is established undisputed fact that no incriminating material was found during the course of search, and the reas....
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....hich is impermissible in law. In support, he placed reliance on the judgment delivered by the Delhi High Court in the case of PCIT Vs. Smt. Krishna Devi [2021] ITA 125/2020 (Delhi HC) where the Hon'ble Court has held that the Revenue must establish a specific nexus between the assessee and the alleged manipulation, generalized allegations do not suffice. The Ld. AR further drawn our attention to the fact that the SEBI order was also quashed in the subsequent appellate proceedings by the Securities Appellate Tribunal vide order dated 28.01.2020 and thus the allegation based on such report does not survive. 5.4.3 The Ld. AR has submitted a comprehensive rebuttal in tabular form to the DRs Assertions made in defense as under: DR's Assertion Appellant's Rebuttal Pradeep Garg and Rajeev Sharma are auditors who controlled STAL/SILL penny scrip Both have retracted their statements. No cross-examination opportunity was provided to the assessee. Under Andaman Timber (SC), reliance on their statements without cross-examination is a "serious flaw making the order a nullity." Under CIT v. Uttamchand Jain (Bom HC), retracted confessions require independent corroborating evidence.....
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.... may be considered and the appeal may be decided on the legal issues and merits of the case in the interest of justice. 5.5. Admittedly, in the present case of the appellant, no incriminating documents were found or seized during the course of search proceedings as evident from the Panchnama. Only few electronic devices were seized however no cognizance of the contents of the said electronic devices were taken by the AO, either in the Assessment Years from 2021-22 to 2023-24 for 153A proceedings or for reopening of assessment proceeding u/s 147/148 of the act of the assessment year under consideration i.e. 2015-16 which leads to the irrefutable conclusion that no material was found during the course of search & Seizure proceedings. In our view, when no material relating to the income of the appellant for any assessment year was found during the course of search, then there was no question of existing of any incriminating material. Thus, the Ld. AO was left without jurisdiction to issue Notice u/s 148 of the Income Tax. 5.5.1. The decision relied by the CIT (A) in the case of Pr. CIT v. Gokul Ceramics (Gujarat HC, 2016) [241 Taxman 341] is not applicable to the facts of the pr....
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....the year under consideration. 5.5.6. In our view, since the appellant assessee has been a shareholder who made large capital gains in a stock (a fact already existed in knowledge of the department from the return) and it would never become new material. Therefore, the reopening of the assessment without having new material evidence would tantamount to reopening of assessment on the basis of a change of opinion, which is impermissible under law. 5.5.7. The Ld. CIT (A) has misinterpreted the judgment of Abhisar Buildwell Pvt. Ltd (SC) and summarily brushed aside the Supreme Court's landmark ruling as "distinguishable" without giving a cogent reason that how it was distinguishable. Abhisar Buildwell (2023) dealt with completed assessments in search cases and held that no additions can be made in absent incriminating material - a principle squarely applicable to the fact of the present case of the appellant. The CIT(A) offers no explanation why that ratio would not apply. The only implicit attempt made that the AO had tangible evidence from search, on a false premise as there was nothing incriminating material found and seized during the search. The AO's "reason to believe" was b....
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.... the appellant challenged that learned CIT(A)) erred in law in holding that the Section 148 notice dated 19.03.2024 was within limitation as he failed to appreciate that the extended 10-year period under Section 149(1)(b) was not available, as the search unearthed no asset representing escaped income over Rs. 50 lakh for Assessment Year 2015-16. 6.1. The Ld. CIT(A) upheld that the notice under section 148 dated 19.03.2024 was within limitation period, by observing as under: "It is found that the AO issued the notice on 20.03.2024 based on tangible information obtained during the search and subsequent investigation, which included records and documents of the appellant. The AO had in his possession evidence prima facie indicating transactions and income of substantial value, including LTCG on shares, which formed a valid basis to invoke the extended limitation under Section 149(1)(b).It is well settled that the requirement under Section 149(1)(b) - that income be represented in the form of an asset exceeding Rs 50 lakhs - is satisfied if the AO has material indicating substantial escaped income, and the statute does not require absolute proof at the stage of issuing the ....
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....sion was introduced to balance revenue interests with taxpayer rights - permitting reach-back up to 10 years only in exceptional cases where substantial undisclosed assets are found during the search. Parliament's intent is clear that absent of such asset evidence, past assessments beyond 3 years cannot be opened. 6.2.2 In the present case, no assets were unearthed in Search as, the search did not uncover any hidden asset of the appellant for Assessment year 2015-16. The department did not find any unreported bank account, benami property, secret jewelry or cash, to represent stored value of alleged undisclosed income or asset. The Ld. AR contended that the shareholding investment in question (shares of Svaraj Trading and Swadeshi Industries) was already fully disclosed as these shares had been bought in the earlier years which were duly disclosed as investments in earlier returns of the income and sold on the stock exchange with sale proceeds coming through banking channels. These shares or their sale proceeds cannot be considered "unreported assets" discovered by the Department as they were already on record as per the regular returns of income filed by the assessee. The AR ar....
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....were not disclosed. Here, the shares were disclosed; the sale proceeds were received in bank and duly recorded. So, neither the shares nor the cash can be called undisclosed assets. The Department's own actions confirm this fact that no asset was seized or identified during search relating to these transactions. 6.2.5 The appellant further submits that the Department cannot dilute section 149(1)(b)'s "reveal" standard by collapsing it into section 148's lower-threshold notion of "information that suggests escapement". Even where the statute deems "information" to exist in search-related contexts, the time-limit gateway remains section 149, and the AO must have in possession evidence which reveals escapement represented as asset/ entry/ expenditure. The distinction is doctrinally important because Parliament intentionally reduced the ordinary reopening period to three years and reserved the extended window for a narrow category of serious cases backed by evidentiary revelation. The Hon'ble Delhi High Court in Ratnagiri Gas &Power (P) Ltd. v. ACIT [2025] 174 taxmann.com 331 (Delhi), explicitly breaks down section 149(1)(b) into conjunctive requirements and quashes a notice where t....
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.... Explanation. Yes, shares and securities are listed as assets - but only if not disclosed. For example, if someone was found holding unreported shares worth Rs. 50 lakh acquired out of unaccounted money that could trigger extended time. In the present case, the shares were fully disclosed holdings duly reflected in earlier years' returns and therefore they were not clandestine assets. In fact, they were listed securities transacted on the stock exchange transparently. Meaning thereby that there was no concealment of the investment in those shares. Thus, treating these shares or their sale proceeds as an "undisclosed asset" is incorrect assumption in the eyes of law. Such an observation of the Ld. CIT(A)'s would absurdly mean that any time the AO believes some income was understated, the underlying source or investment automatically becomes an 'asset' to invoke 10-year limitation. This would certainly nullify the legal interpretation of the wording of the law. 6.4.3 It is seen that the CIT(A) has repeatedly mentioned "tangible information from search and investigation" and "records and documents of the appellant" to justify the AO's belief. However, he failed to identify a single....
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.... the Assessment Year under consideration. 6.4.6 It is not disputed that the CIT(A) has admitted the fact that the income relates to LTCG already declared in the return of income while observing that it does not render the notice invalid". It was part of the original assessment even if under exemption. Several courts including the Supreme Court in CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC) have held that re-opening is not for reviewing already assessed items in the absence of new information. The extended limitation was certainly not meant for incomes that were on record. The phrase "escaped assessment" implies the income was missed in original proceedings. Here, it wasn't missed - it was consciously treated as exempt. So even conceptually, this was beyond the scope of what the extended time provision targeted. The CIT(A)'s view essentially allows the Department to circumvent the normal limitation to reexamine a past claim of exemption, which is not permitted under Section 149(1)(b). 6.4.7 The Hon'ble Bombay High Court in case of Sapna Vinod Jain v. ITO [2023] (unreported citation, oral judgment available) quashed a notice for AY 2013-14 where the AO tried to invoke exte....
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....provide the assessee a copy of the Principal CIT's sanction obtained under Section 151, and the sanction itself appears to have been given mechanically, without due application of mind, vitiating the validity of the notice and issue of violation of section 153D. 7.1 The CIT(A) dismissed this ground, by stating that non-supply of the sanction did not vitiate the proceeding since sanction was obtained and no lack of approval was evidenced by relying on a Bombay High Court case to say non-communication isn't fatal. The relevant part of CIT(A)'s order reads as under: "The appellant has requested AO to provide copy of approval received from higher authority, which was not provided during the course of assessment proceedings. The process of receiving approval for reopening of case u/s 148 of the Act is an internal communication of the department, which could not be shared with the assessee. In this regard, reliance is placed on the decision of Hon'ble Delhi High Court in case of Bharat Nidhi Ltd. v/s CIT (ITA No. 139/1996), wherein it was held that mere non communication of the sanction order does not vitiate the reassessment, provided the approval was actually granted and re....
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....T (A). 7.4.1 From the record, it is evident that reasons recorded were generic, that DGIT (Inv) Rajasthan Jaipur gave approval on the same day 19.03.2024 in the haste to issue notice before limitation expired, and that AO refused to share the approval text. These collectively give rise to a strong inference of a perfunctory sanction. The appellant might not have the direct evidence (because the Dept withheld it), but circumstantial evidence and Department's non-compliance with Instruction 1/2022 shift the onus onto the Department to prove sanction was proper. The CIT(A) improperly kept the onus on the appellant to prove a negative (i.e. prove that DGIT's) mind wasn't applied), whereas once the appellant raised a serious doubt and the AO breached a procedural directive, the burden should shift to the Revenue to dispel that doubt by producing the sanction note. They did not do so even before CIT(A) - which strengthens the appellant's case. In absence of approval of DGIT, issuance of notice u/s 148 is void and consequential assessment order is also void ab-initio. In this regard Hon'ble Supreme Court on 13.09.2024 has dismissed the departmental SLP No. 33611/ 2024 filed in case of ....
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....sessee's appeal vide order dated 26.06.2025 on mechanical approval by placing reliance on the judgment of Hon'ble Supreme Court wherein the Revenue's SLP against Orissa High Court ruling was dismissed in the case of Serajuddin & Co. involving Rs. 800 crore addition in post-search assessment. The Hon'ble Orissa High Court had upheld ITAT order where it was held that Section 153D approval was a mandatory requirement in post-search assessments which cannot be given mechanically. 7.4.5 Considering the facts and judicial precedents, we hold that violation of provision of section 151 and 153D of the Act rendered the reassessment order void ab initio and liable to be quashed. 8. In ground no. 4 the appellant challenged that the learned CIT(A) was not justified in rejecting the appellants questioning the validity of notice issued u/s 143(2) of the Act. 8.1 The Ld. CIT (A) has rejected this ground by observing that the appellant did not raise the issue before the AO, and participated in proceedings, and hence by virtue of Section 292BB, cannot object now. Relevant part reads as under: "The contention of the appellant has been perused and it has been observed that the a....
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....o the objections. 8.2.1 There exists a binding guideline (issued by the CBDT/Finance Ministry, F.No.225/66/2023/ITA-II dated 24.05.2023) to the Income Tax department which specifically deals with "compulsory selection of returns for Complete Scrutiny during FY 2023-24 - procedure for search cases." This guideline mandates that in cases emanating from search even though processed under section 147 of the Act, the AO must seek administrative approval of the PCCIT/PDGIT before issuing any scrutiny notice under 143(2). The logic is to ensure oversight, given that search matters are sensitive. In the appellant's case, the Section 148 notice itself was part of a search-related reopening. Yet, the Section 143(2) notice dated 15.06.2024 did not mention any approval having been taken, nor was any evidence of such approval provided during assessment or appellate proceedings. The AR contended that even on the appellant specifically pointing out this lapse, the Department has never produced an approval letter or even asserted that approval was indeed obtained. Thus, the AO has violated provisions u/s 151 of the Act by not taking the mandatory approval as required under law. Meaning thereby ....
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....ates the entire reassessment. 9.1 The Ld. CIT(A)'s vide Para 8.2.2 rejected the ground by observing as under: "The AO has provided a copy of reasons recorded for reopening of case u/s 148 of the Act vide letter dated 13.06.2024. The assessee has filed objections to the reason recorded vide letter dated 19.06.2024. 8.2.3: --------------------------As the case of the appellant is covered during search and seizure action on Miraj Group, therefore, there are no mandatory requirements for disposing of the objections raised by the appellant against the reopening u/s 148 of the Act, as he is deemed to have information for reopening of the case." 9.2 The Ld. AR argued that the AO's failure to dispose of the appellant's detailed objections to the Section 148 notice by way of a separate speaking and a reasoned order before proceeding further is a fatal flaw. The Supreme Court's decision in GKN Driveshafts (India) Ltd. v. ITO 259 ITR 19 (SC) laid down an unequivocal procedure for reassessments by holding that when an assessee objects to the notice/ reasons, the AO "is bound to dispose of the same by passing a speaking order, before proceeding with the assessment." In t....
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....t" and not a mere formality. In the case of Smt. Kamlesh Goel v. UOI [2016] 380 ITR 259 (Delhi), the court quashed reassessment since objections were disposed of in the final order instead of a prior separate order. The Rajasthan High Court in CIT v. Deepak Kumar Agarwal (2018) 94 taxmann.com 269 (Raj) held that where the AO did not pass a separate speaking order on objections, the reassessment was invalid. 9.3.1 We therefore hold that the AO was bound to dispose of the objection of the assessee by passing a speaking order, before proceeding with the assessment. Such a failure on the part of the AO in violation of the principle of law laid down by Hon'ble Apex Court rendered the assessment proceedings illegal and void and the consequential reassessment order is liable to be quashed. 9.3.2 Accordingly, we accept the grievance of the assessee as genuine on this legal issue and this ground 5 is allowed. 10. The issue raised in the grounds no. 6 to 10 are related to violation of natural justice, no opportunity to cross examination of third party, characterizations of the investment in shares as "penny stocks", disregard to martial evidence in violation to section 142(3), and t....
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....re extraneous materials adverse to the appellant's claim. Crucially, the appellant was never given copies of these statements/reports during the assessment, nor any chance to cross-examine the persons who made the statements. The appellant specifically requested such opportunity when it became evident that the AO was using that material as per the show-cause notice. Despite that, no cross-examination was allowed to the assessee is a plain violation of natural justice. It is a cardinal rule of law and fair play that such statements cannot be used against the appellant without the appellant being given an opportunity to question those individuals (cross-exam) and to rebut such claims. 10.1.2 In the present case, the AO proceeded to make the addition on allegations that were never proved through admissible evidence. This is textbook violation of natural justice and Section 142(3). Section 142(3) specifically enjoins that all material gathered by the AO must be made available to the assessee and the assessee must be given an opportunity to respond to it. The Hon'ble Rajasthan High Court in CIT vs. Ashim Kumar (2009) 308 ITR 190 (Raj.) held that where statements of stock brokers were....
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....nceived theory that any large capital gain from certain low-priced stocks must be bogus. This violates a foundational principle of tax jurisprudence as each assessment must be based on facts and evidence specific to that assessee, not on assumptions or guilt by association. The appellant assessee reported LTCG from sale of shares of Svaraj Trading & Agencies Ltd. (STAL) as well as Swadeshi Industries & Leasing Ltd. (SILL). In support of these transactions, the appellant had submitted voluminous evidence during assessment, including contract notes and broker bills for purchase and sale from SEBI-registered stock brokers, with trade time stamps and stock exchange transaction IDs, Demat account statements showing the credit and debit of the shares in question, bank statements reflecting payments for share purchases and receipt of sale proceeds where all payments were made through account-payee cheques/RTGS, routed via banking channels, and even the financial statements of the companies whose shares were traded (establishing that they were recognized companies listed on the exchange at the time). Admittedly, the AO did not find a single fault in any of these documents. There is no find....
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....s and badges of fraud in those cases (including findings that many of those assessee's had funded the purchase in cash, etc.). In the present case, those badges are absent. In our view, it would be a travesty of justice to apply the conclusion of Swati Bajaj blindly to every case of LTCG on small stocks. Each assessee has the right to have his case decided on its own merits. Here, on merits, the evidence leans heavily in the assessee's favor and the Revenue has not brought on record any corroborative evident to meet the burden of proof required under Section 68 of the act. 11.1.1 It is noted that the AO failed to point out any specific inconsistency or sham element in the appellant's documentation, he simply disregarded the evidence by invoking a general hypothesis that certain companies' shares (like STAL) were known to be used by others for generating bogus LTCG, hence the appellant's gain must also be bogus. This approach has been condemned by courts. The Kolkata ITAT in Navneet Agarwal v. ITO [2018] 97 taxmann.com 347 (Kol. Trib.)-dealing with a batch of so-called penny-stock cases - observed that just because a scrip's price moved dramatically does not ipso facto make every....
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....ew, the appellant has complied with all requirements of law to claim the LTCG exemption based on dematerialization of shares, holding period, STT paid, etc., and nothing tangible has been brought on record by the department to impeach those transactions. Therefore, we hold that the order of the Ld. CIT (A) is infirm and perverse to the facts on record and we, accordingly, approve the rightful exemption claimed by the appellant under Section 10(38) of the act and as such the addition made on this account is liable to be deleted. 12. The next issue is related to confirmation of the addition of LTCG Rs.31,60,76,674/ as unexplained cash credit under Section 68. 12.1 The Ld. CIT(A) confirmed the addition by observing as follows: "...the various case laws quoted above clarifies that both these companies shares were misutilized for generating bogus LTCG u/s 10(38) of the Act. These scripts were controlled and managed by the common directors of the group and with the help of Kolkata-based entry operators, huge LTCG was booked which was totally against the rules on which the share market functions. Hence, relying upon the above case laws mentioned as well as the whol....
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....rties: The shares were sold on the exchange through recognized brokers, and the counter-parties to the trades were actual market participants (unknown to the assessee personally, but the trades were settled via the stock exchange clearing corporation). The involvement of regulated intermediaries (SEBI Registered/ approved brokers and the stock exchange) establishes the identity of the source of funds in the sense required by Section 68. b. Genuineness of transaction: The transactions took place in an open market at prevailing market prices. The Demat account entries confirm that the shares moved from the assessee's account to the buyers. Contract notes and exchange trade logs corroborate that the trades were executed transparently. Payment was received through banking channels (NEFT/RTGS from the exchange/brokers), leaving an audit trail. Thus, nothing about the transactions was "cash" or off record - they bear the hallmark of genuineness. c. Creditworthiness of source: While the concept of "creditworthiness" typically applies to lenders or investors, in the context of exchange trades it translates to the financial capacity of the buyers who paid the sale price. H....
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.... the shares through exchange data or to examine officials of the companies (STAL/SILL). All evidence that was available - the paper trail of transactions - actually supported the assessee. The Department had nothing more than a conjecture that "these shares rose astronomically, so it must be a sham." But suspicion, however strong, cannot take the place of proof. The law requires tangible evidence of bogusness, which is missing here. 12.1.3 It is noted that there is no finding of the authorities below regarding the Assessee's Involvement in Price Manipulation and that the entire premise of treating the LTCG as bogus is the dramatic rise in the share prices of STAL and SILL. It is alleged that these were "penny stocks" whose prices were artificially rigged. Even if, for the sake of argument, one accepts that such manipulation occurred in the market, there is not a shred of evidence that the assessee had any role in it. The assessee is not connected to the promoter groups or so-called operators of these companies. It is noted that the assessee is an investor who purchased shares before the price increase and then sold after holding for more than a year. There is nothing illicit abo....
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....suggesting a design. The court drew inferences on collective evidence of manipulation. In the present case, no such cogent pattern or link has been shown specific to the assessee. The assessee's transactions, though yielding high profits, were bona fide trades and no irregularities (such as synchronized trading or circular transactions) were demonstrated. In the present case, the Revenue's rests purely on suspicion from price rise, without the support of any specific investigative finding against the assessee. Moreover, the Calcutta HC decision, though respected, is not binding on this Tribunal, especially given contrary Jurisdictional High Court judgements and other Courts Judgements on similar facts. Supreme Court - Dismissal of SLP(SLP(C) has no precedential value as firstly it was on different context and secondly the Supreme Court's dismissal of the SLP was not a speaking judgment on merits as it simply let the High Court's findings stand, because those findings were fact-specific. An SLP dismissal does not lay down any law, and it cannot be taken as a blanket approval that all penny-stock gains are bogus. Each case shall be decided on its facts. In the present case, the facts....
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....uying those shares. Thereafter, those shares were sold openly, and the sale proceeds came from unknown market buyers. The Department has not shown that any of the sale proceeds originated by cycling as there is no evidence of the assessee cycling his money out and back in. In our view, when it is accepted by the department that the assessee used his taxed money to buy shares as admitted by the CIT(A) then there is no question of any extra cash changing hands, and the resultant gain cannot magically transform into untaxed income as it is being a market-derived profit. 12.2.3 It is noted that the AO and ld. CIT(A) did not point out a single defect in the documents submitted by the assessee. The revenue authorities have not stated that the contract notes were bogus, or the Demat statements were fabricated, or that the money trail was inconsistent. In fact, the Revenue never questioned the veracity of these documents. Meaning thereby that the primary evidence of the transactions stands unquestioned. It is settled principle of law that unimpeached evidence cannot be disregarded unless rebutted. The CIT(A)'s order effectively disregards the assessee's evidence not by rebutting it, but....
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....nus shares and those evidences have not been doubted by the authorities. 8. At this stage also, it is required to be noted that the entire transaction was done by the assessee through the platform of BSE by paying necessary security transaction tax and the transaction was undertaken by the share brokers, no such allegation was made against the said broker for indulging in any price manipulation. 9. In view of the aforesaid, in our considered opinion, the questions of law framed by the appellant - revenue cannot be termed as substantial questions of law and thereby, the same deserve no interference. Accordingly, the present Tax Appeal is dismissed. (ii) PCIT v. Renu Aggarwal (Smt) (2023) 456 ITR 249 /294 Taxman 521 (SC) (03.07.2023) Dept SLP dismissed, PCIT v. Renu Aggaral (Smt) (2023) 153 taxmann.com 578 (All. HC) (06.07.2022), ITAT Lucknow ITA/204/LKW/2020 AY 2014-15 (17.01.2022) S. 68: The Assessing Officer disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were being misused for providing bogus accommodation of LTCG. Tribunal deleted the addition. On appeal High Court aff....
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....ed commission for taking the accommodation entry, is consequential to the main issue. Hence, the same is also not sustainable." 6. We are of the view that the present appeal does not involve any substantial question of law. Learned ITAT has specifically held that the assessee has produced all the relevant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court in CIT v. Smt. Pooja Agarwal, [2018] 99 taxmann.com 451 (Raj.) wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue. 7. In the light of above facts, this Court is of the view that the order of learned ITAT requires no interference and therefore, the appeal is dismissed. (iv) Hon'ble Rajasthan High Court in CIT vs. Smt. Pooja Agarwal 214 Taxman (2018) 121 (Raj.). It has upheld ITAT decision in deleting penny s....
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....sely affected". 12. In view of the factual matrix and judicial precedent, we find no infirmity or perversity in the order of the ld. CIT(A) and according, the order of the ld. CIT(A) in deleting the addition on account of disallowance of claim of exemption on long term capital gains on sale of shares u/s 68 and commission payment u/s 69C of the Act is held to be justified, and as such, the same is upheld. (VI) Hon'ble ITAT Mumbai (Bench-E) in case of ACIT v/s Kashyap Mahesh Vora in ITA No. 4322/MUM/2024 on 10.07.2025 in relation to Bogus capital gains from penny stocks, wherein addition is deleted by ld. CIT(A) It is held: " ---------------------------- Upon careful consideration, we observe that no independent enquiry or verification has been conducted by the ld. AO during the assessment proceedings. The addition has been made solely on the basis of the report of the DGIT (Investigation), Mumbai without corroborative evidences specific to the assessee. In view of above, we do not find any infirmity in the order passed by the d. CIT(A). Accordingly, the grounds raised by the revenue are dismissed, and the impugned appellant order is hereby upheld....
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....-------------------------------------------However the revenue failed to rebut the said documentary evidences and to bring on record any evidence to prove that assessee was actively involved in manipulating the script in question, therefore adhering to the principles of judicial consistency and judicial discipline and also taking into consideration the totality of facts and circumstances as discussed in detail in the above paras, we direct the AO to delete the additions made u/s 68 of the Act. Consequently the grounds raised by the assessee are allowed. (x) ITAT Delhi "A"- Trib. [2024] 168 taxmann.com 219: Archit Gupta v. ACIT 8. Considered the rival submissions and material placed on record. The Assessing Officer observed that assessee had made huge profit out of this investment because 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 throu....
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....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 judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matr....
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.... on oath giving explanation of the reasons and circumstances for investment, the same cannot be brushed aside on the basis of general principles of the modus operandi of bogus LTCG claims. 15. In the light of the aforesaid, we are inclined to accept the grounds of appeal of the assessee holding that ld. tax authorities below have fallen in error in considering the LTCG claim of the assessee from the two disputed scrips as bogus claim. The appeal of the assessee is allowed with consequences to follow. (xii) Jignesh Ramjibhai Patel v/s ITO (2025) 210 Taxlok.com (IT) 430 ITAT AHD on 03.06.2025 Para 7 "------The Assessing officer has not at all pointed out as to how the assesse was involve in the manipulation of the price difference at the time of purchase as well as time of sale of the said script. The contention of the ld. AR appears to be correct that it is a mere incidental benefit gained by the assesse due to rise in price of said script.-----------Thus, the appeal of the assesse-----------------------------is allowed " 12.2.5 The Hon'ble ITAT Ahmedabad (Supra) has allowed the assessee's appeal by deleting the addition of Rs.2,23,95,400/- made under s....