TaxTMI 
TaxTMI 
2025 (3) TMI 2124
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....de by the AO on sale proceeds of the share u/s 68 of the I.T. Act., without appreciating the fact that as per investigation done by income tax Department (Inv), Kolkata dated 27.04.2015, specific findings in reference to transactions in the scrip M/s Luminarie Technologies Ltd clearly establishing the fact that the scrip was a penny stock and the transaction was made to generate bogus long term capital gain for the beneficiaries, one of them being the assessee. (iii) On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the financials of M/s Luminaire Technologies Ltd enumerated at Para 3.3 of the assessment order on whose share the assessee alleged to have earned enormous Long Term Capital Gain. (iv) On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that M/s Luminaire Technologies Ltd is only a paper company literally having no business operations. (v) On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that M/s Luminaire Technologies Ltd, a penny stock company, does not have any worthwhile asset, creditworthy business, strong financials o....
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...., then the claim so made fails. (xv) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 2,52,47,265/- made by the AO on sale proceeds of the share u/s 68 of the I.T. Act. without appreciating the fact that the assessee has failed to establish the financials and operation of the company to prove the enormous rise in share value and thereby the genuineness of the transactions to the satisfaction of the AO, thereby ignoring the Apex Court decision in the case Pavankumar M. Sanghvi Vs Income-tax officer (Special leave to appeal (c) No(s) 10250 of 2018 and NRA Iron and Steel Pvt. Ltd (SLP (Civil) No. 29855 of 2018) dated 5th March, 2019 on same facts. (xvi) On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the word 'evidence' as used in section 143(3) is comprehensive enough to cover circumstantial evidence also, and it is not confined to direct evidence. (xvii) On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that under the tax jurisprudence, the word 'evidence' had much wider connotations and the use....
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....he Assessing Officer noticed that the assessee had declared long term capital gains of Rs. 2,47,08,362 and claimed the same as being exempt under section 0(38) of Act. The assessee purchased 50,000 shares of Luminaire Technologies Ltd., for Rs. 5,00,000, in physical form which has been later dematerialized. The shares have been sold at an average rate of Rs. 50.49 per share. The total sale proceeds amounting to Rs. 2,52,47,265 and the LTCG on the same amounts to Rs. 2,47,08,362, which is exempt under section 10(38) of the Act. The Assessing Officer concluded the assessment holding that the claim of the assessee of exempt LTCG amounting to Rs. 2,47,08,362, cannot be allowed and the assessment order was passed making addition of Rs. 2,52,47,265 on account of unexplained cash credits under section 68 of the Act. 4. On appeal, the learned CIT(A) held that the addition made by the Assessing Officer on the basis of inference and presumption is found unsustainable and hence the learned CIT(A) directed to delete the addition of Rs. 2,52,47,265, made by the Assessing Officer on account of unexplained cash credits under section 68 of the Act. The detailed observations of the learned CIT(A....
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....mitted that he has submitted all requisite details and sanctity of same has never been questioned or disputed by the AO. Even during the appellate proceedings, appellant submitted: 1) Photocopy of Share certificates, 2) Photocopy of cheques through which payment was made for purchase of shares, 3) Photocopy of bank account, 4) Demat Statement and trading account. The appellant's written submission along with all the documents were sent in remand proceedings to the AO. The AO objected to the acceptance of additional evidence and stated that all this documents were never submitted during the assessment proceedings. The remand report of the AO was shared with the appellant. The appellant filed rejoinder to the aforementioned remand report. The appellant rebutted the observation of the AO that no document was submitted during the assessment proceedings. Appellant submitted that the assessment order nowhere observes that appellant has failed to submit requisite details, and the appellant also highlighted the Para 2 of the Assessment Order which stated that "Notice u/s 142(1) was issued on 04.07.2016 and 29.06.2016. In response to the said....
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....R & Computation was also forwarded to the AO in remand proceedings. The AO has not controverted the appellant's submission. Therefore, the observation of the AO that this was one time transaction and the appellant was not active in stock market, is contradictory to the facts on records. 7.6 The AO has elaborately discussed the modus operandi adopted by certain persons to convert unaccounted into accounted money by relying on the investigations carried out by the DIT(Investigation) Kolkata, wherein during the course of Investigation, few brokers were questioned and those brokers had confessed of providing accommodation entries. The assessment order also listed the names of such brokers and their confessionary statements of indulging in penny stock transactions of company Luminaries Technologies Ltd'. However, in the aforementioned list nowhere the name of the broker of the appellant (i.e. HDFC Securities Ltd) is mentioned. The appellant has sold his entire shareholding through stock broker 'HDFC Securities'. 7.7 The AO has not brought on record any direct or indirect circumstantial evidence on the basis of which it can be concluded that the transact....
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....s duly discharged the onus that lies on him, in catablishing the genuineness of the transactions, and that being so, it was for the AO to disprove the claim of the appellant, by bringing on record credible evidence to the contrary. On the basis of facts, the addition made is found untenable. 7.11 The AO while framing the assessment order also relied on the judgments of Mumbai Tribunal in the case of Ratnakar M Pujari & Usha Chandresh Shah. I have gone through facts of both the cases and it is observed that the facts of the cases before Tribunal are completely distinguished when compared to that of the appellant. Even the judgment of Indore Tribunal in the case of Neeraj Panjwani is not applicable to the facts of the appellant's case. 7.12 The appellant has relied on the judgment of Hon'ble jurisdictional Bombay High Court in case of CIT Vs Mukesh Ratilal Marolia, Shyam Pawar & Jamnadevi Agrawal. The submission of the appellant relying on all the aforementioned judgments was forwarded to the AO in the remand proceedings. The AO did not controverted the applicability of aforementioned judgments. However, the AO has placed reliance on the judgment of Bombay H....
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....es, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the AO was not justified in holding that the amount of Rs. 1,41,08,484/- represented unexplained investment under Section 69 of the Income Tax Act, 1961 cannot be faulted." (Emphasis Supplied) It is observed that the SLP filed by the Department against decision of Hon'ble Bombay High Court in the case of Mukesh Marolia (ITA 456 of 2007) has been dismissed by the Hon'ble Supreme Court of India. 7.15 Similar issue was also decided in assessee's favour in CIT v. Smt. Jamnadevi Agrawal (328 ITR 656) (Bom) wherein it has been held as under: "Held that from the documents produced before the Court it was seen that the shares in question were, in fact, purchased by the assessees on the respective dates and the company had confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares of the respective buyer was also established by producing documentary evidence. It is true that some of the transactions were off-*market transactions. However, the purchase and sale price of the shares declared by the as....
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....e appellant. For the detailed reasons enumerated in the paragraphs hereinabove, and the judicial precedents discussed therein, the addition made by the A.O. on the basis of inference and presumption is found unsustainable." 5. Before us, the learned Departmental Representative heavily placed reliance on the order passed by the A.O. He submitted that the transactions are all colourable device and has been entered as a subterfuge with sole intention for tax evasion and to bring unaccounted income of the assessee back to books under the garb of exempt income. Accordingly, he contended that the impugned order passed by the learned CIT(A) should be reversed. 6. The learned Counsel for the assessee furnished a gist of submissions which are as under:- "The dispute in the present appeal pertains to Long-Term Capital Gain from sale of shares declared by the Assessee at Rs. 2,47,08,362 and same is exempt under section 10(38) of the Income Tax Act, 1961 ("Act") and which has been disallowed by the AO and treated the sale consideration on sale of shares of Rs. 2,52,47,265 as unexplained cash credit under section 68 of the Act. 2. The addition so made has been deleted by....
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....d transaction of sale of shares satisfies all the criteria for claim of exemption under section 10(38) of the Act and relied upon various judicial precedents in this regard. 9. The Ld. CIT(A) has correctly held that the transaction of the sale of shares is a LTCG exempt under section 10(38) of the Act. 10. The Assessee submits that the transaction of sale of shares being through proper banking channels, on recognised stock exchange, security transaction tax having been paid on the same and the shares undisputedly being long-term capital asset classified as LTCG which has rightly been claimed as exempt under section 10(38) of the Act and which has further rightly been upheld by the Ld. CIT(A). 11. The Assessee places reliance on the decision of the Ld. CIT(A). 12. The Assessee further places reliance on the following judicial precedents in support of the Assessee: 12.1. PCIT Vs. Ziauddin Siddique (Bombay HC) - wherein the Hon'ble Bombay HC has refused to interfere with the order of the Hon'ble ITAT more particularly as there was no allegation that the Assessee was engaged in price rigging. 12.2. PCIT Vs. Smt. Krishna Devi....
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....commodation entry as alleged by Assessing Officer, impugned addition made under section 68 towards proceeds of sale of listed shares was to be deleted and have considered the judgement of Hon'ble Calcutta High Court in the case of Swati Bajaj. 12.9. Amrita Abhishek Doshi vs. Deputy Commissioner of Income-tax - [2024] 167 taxmann.com 377 (Mumbai - Trib.) No additions towards bogus LTCG if assessee duly sold shares on recognised stock exchange. 12.10. Smt. Hema Ramesh Jain vs. Income-tax Officer [2024] 162 taxmann.com 440 (Mumbai Trib.) No sec. 68 additions towards LTCG on sale of shares merely relying upon general report of investigation wing - Where assessee claimed LTCG on sale of shares as exempt under section 10(38), since assessee in order to prove transaction of purchase & sale of shares had filed primary documents like debit-note, share certificate and demat statement, etc., and further, fact of sale of shares through stock exchange was proved by copy of contract of sale of shares and that purchase consideration for sale of shares had passed through banking channel, impugned claim made by assessee was to be allowed." 7. The learned Counsel, apart from....
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....iscussions rendered by the Hon'ble Jurisdictional High Court on identical issue in CIT v/s Shyam R. Pawar, [2015] 54 taxmann.com 108 (Bom.), wherein the Court observed as under:- ""3. Mr.Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr.Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted. 4. Mr.Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of ca....
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....any was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the ....
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.... of 2017 dated 4th March, 2022) and relevant discussions made by Hon'ble Bombay High Court are extracted below:- "2. We have considered the impugned order with the assistance of 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 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 the 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 judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in tha....
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....e and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal." In the instant case also, we noticed that the evidences furnished by the assessee to prove the purchase and sale of shares, payment made/received, entry/exit of shares in the demat account of the assessee etc., were not doubted with. 13. In the case of PCIT vs. Smt Krishna Devi (supra), the Hon'ble Delhi High Court has noticed that the reasoning given by the AO to disbelieve the capital gains declared by the assessee, viz., astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. Accordingly, the Hon'ble Delhi High Court affirmed the decision rendered by ITAT in deleting the addition of capital gains. 14. Accordingly, in the facts and circumstances of the case, we are of the view that the decisions rendered by the jurisdictional Hon'ble Bombay High Court in the cases cited above shall apply to the present case, since the AO has not established that the a....