TaxTMI 
TaxTMI 
2026 (5) TMI 1860
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....genuine and supported by documentary evidences. In support of the above ground, the appellant respectfully submits the following: a. The Ld. CIT(A) have not considered the Bills, Contract Notes and Bank statements produced relating to capital gains transaction wherein purchased quantity had been transferred to Demat A/c and sales quantity as well had been gone out of Demat A/c. b. The Ld. CIT(A) further erred in not considering that the Appellant had paid STT In respect of Capital Gains Transaction and held Shares for more than 12 months. on the basis of pure investments. c. The Shares purchased were through registered broker and also sold the share on the recognized stock exchange was also through registered broker and are delivery based. d. The payment for purchase and Receipt from sale of Shares were through Banking Channel, which were duly reflected in the Bank Statement. e. Once the transactions are executed through a recognized stock exchange, supported by STT payment, demat trail, and banking records, they cannot be disregarded merely on suspicion or assumption. f. The impugned addition is therefore unjustified, ....
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.... 6. Subsequently, notice u/s 143(2) on 07.02.2023 and 142(1) on 06.01.2023, 08.02.2023, 26.04.2023 and 06.05.2023 were issued and served on the assessee in response to which, authorized representative of the assessee attended and furnished the requisite details called for from time to time. 7. The case was opened on mere information by Director General of Income Tax (Investigation), Kolkata which had undertaken investigation of penny stock companies and indicating thereof, bogus LTCG/STCG entries claimed by large number of beneficiaries. 8. The assessee representative attended and filed the submissions and case was discussed with him. 9. The Ld. AO has treated the aforesaid transaction as Bogus only on the basis of the Information from Kolkata Investigation Wing. 10. The Ld AO did no independent analysis of facts and he only relied on information, without appreciating evidences. A.O. did not apply his mind and made addition without checking figure with collaborative evidences. 11. The order was passed under section 147 r.w.s. 143(3) of the Income Tax Act treating entire sale consideration as a bogus capital gain / penny stock and ad-ho....
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....HE PAYMENT FOR PURCHASE AND RECEIPT FROM SALE OF SHARES WERE THROUGH BANKING CHANNEL, WHICH WERE DULY REFLECTED IN THE BANK STATEMENT. E. ONCE THE TRANSACTIONS ARE EXECUTED THROUGH A RECOGNIZED STOCK EXCHANGE, SUPPORTED BY STT PAYMENT, DEMAT TRAIL, AND BANKING RECORDS, THEY CANNOT BE DISREGARDED MERELY ON SUSPICION OR ASSUMPTION. F. THE IMPUGNED ADDITION IS THEREFORE UNJUSTIFIED, ARBITRARY, AND LIABLE TO BE DELETED. WHY AO MADE ADDITION i. The Ld AO on the basis of scrutiny assessment in the case u/s 143(2) and by issuing notice u/s 142(1) dated 03.08.2017 and 21.08.2017 based on some information received from DGIT(Inv.), Kolkata that during investigation carried out in connection with bogus LTCG claimed on penny stocks, it was found that the assessee had also obtained such accommodation entries in the form of bogus LTCG and by extension the entire sale consideration of Rs. 2,06,51,845/- and for availing such accommodation entries, the assessee had paid cash commission of Rs. 4,13,037/- during the FY 2012-13 relevant to AY 2013-14 forming part of the unaccounted income of the assessee. ii. The Ld. AO on the basis of irrelevant materials ....
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.... 08-05-2012 3,840 7,83,327 09-05-2012 3,800 7,73,270 10-05-2012 500 1,01,971 17-05-2012 11,847 23,87,112 Total 12,500 2,06,51,845 Assessee has paid Brokerage, STT and Service tax while sale of shares. Copy of Sales Bill Cum Contract Note is enclosed (PB Page No. 77-88). Cost of Acquisition is Rs. 25,57,949. As per assessee LTCG comes to Rs. 1,80,93,896/- 6) The assessee held the shares for more than 12 months & the receipts were through Bank on 23.04.2012 to 21.05.2012. 7) The said sales consideration duly came in Banking Channel and reflected in Bank Statement. (Pg No. 89 of Paper Book) 8) There are no evidences that assessee given cash to any entry operators. 9) The shares were sold through recognised stock exchange on which the respondent has paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house an....
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....undamental rules of justice. 8) Ld. AO has reproduced the entire report in the assessment order and in conclusion repeated the same contentions in the report as his own reasoning for making the addition. The Summary of the Points of the discussion have been broadly given under the headings "Findings of Investigation Wing", "Findings in the case of Assessee", "Investigations in the case of operators" etc. Under the Heading "Findings of Investigation Wing", Id. AO has explained the Modus Operandi of the Unscrupulous Operators, who were engaged in providing accommodation entries for Profit / Loss in various Shares considered as "Penny Stocks". 9) In the initial paragraphs ld. AO has given the details of Purchase and Sale of the Share Unisys Software & Holding Industries Ltd. Thereafter, he has given his comments on the Company, which is entirely copied from the Investigation Wing Report. Ld. AO has only on the basis of this report made serious allegation that, Appellant's sale of shares of Unisys Software & Holding Industries Ltd was pre-arranged method employed by him in connivance with operators to evade taxes. In this connection, appellant has to submit that, ....
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....ed nor any penalty has been levied by the SEBI. 23) Cross - Examination was not conducted and hence order passed by the Ld. AO contains fatal error: The Ld. AO has not issued notice for conducting further cross- examination. Moreover, merely relied on the investigation report and not even tried to collect further evidences. Hence, the order passed by the Ld. AO required be held as null and void. 24) The assessee has purchased the shares directly from the stock exchange in the open market through a registered stock broker and sold at Bombay Stock Exchange through its share brokers. 25) The Ld. AO denied the claim of long-term capital gain on sale of shares under section 10(38) and made addition of LTCG under section 68. 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 was not in doubt at all because same was also reflected in Demat account. 26) Not only that, the sale of shares was also ev....
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....00 shares, assessee sold of 8000 shares, i.e., 17.77 per cent only as at that time price was best - Major part of shares, i.e., 82.33 percent was still in hand of assessee - All transaction were made through account payee cheque/banking channel - Assessee submitted various documentary evidences to prove genuineness of transaction of sale and purchase of shares - However, lower authorities had not considered aforesaid documents and rejected all claims made by assessee by relying on report of Investigation Wing and thereby made addition - Without bringing any material on record and proving that assessee was directly involved in so called bogus transaction -Assessing Officer failed to substantiate how assessee fell in purview of bogus LTCG scheme- Whether since source identity and genuineness of transaction was established by documentary evidences, there was no case for making addition under section 68 - Held, yes[Para 6] [In favour of assessee] IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI DCIT, Central Circle-6(2) Vs. Shri Dilip B. Jiwrajka I.T.A. /Mum 2012-13) Cross Objection No. 93/Mum/2022 Arising out of I.T.A. No.2349/M/2021 AYs: 2012-13 I.T.A. No. 2326 ....
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....uant to a survey assessee filed revised return and claimed exemption in respect of long-term capital gains on shares under section 10(38) - Assessing Officer rejected assessee's plea and made additions undersections 68 and 69 by relying on statements from 'entry operators' - On appeal, Commissioner (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax - Tribunal upheld Commissioner (Appeal)'s decision, emphasizing assessee's right to correct mistakes and criticized Assessing Officer's reliance on statements from 'entry operators' to support additions under sections 68 and 69 as those statements were recorded in unrelated proceedings before survey on assessee, and assessee was not afforded an opportunity to challenge or cross - examine providers of those statements - On revenue's appeal, High Court confirmed order of Tribunal - Whether there was no reason to interfere with order passed by High Court and therefore, SLP was to be dismissed - Held, yes [Para 3] [In favour of....
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....nge did not arise - It was also apparent that assessee having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax - Whether on facts, transactions of purchase and sale of shares were to be regarded as genuine in nature and, therefore, assesses claim was rightly allowed - Held, yes [Para 23] [In favor of assessee] 4. [2017] 77 taxmann.com 260 (Ahmedabad - Trib.) IN THE ITAT AHMEDABAD BENCH 'B' Pratik Suryakant Shah v. Income-tax Officer, Ward- 10 (3), Ahmedabad* OCTOBER 21, 2016 Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long-term securities (Bogus transactions) - AY 2006- 07 - Assessee purchased 3000 shares of company "T" through a stock broker - These shares were transferred to assesses demat account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assessee was one of beneficiary of such accommodation entries....
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....r of Income-tax-13 v. Shyam R. Pawar [2015] 54 taxmann.com108 (Bombay HC) Section 68 of the Income-tax Act, 1961 - Cash credit (Share dealings) - AY 2003-04 to 2006-07 - Assessee declared capital gain on sale of shares of two companies - AO, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by AO was rightly deleted - Held, yes [Para 7] [In favour of assessee] 10. Ramprasad Agar wal v. ITO2(3)(2), Mumb ai[2018] 100 taxmann.com 172 (Mumbai - Trib.) Where assessee had produced relevant record to show allotment of shares by company on payment of consideration by cheque and assessee ....
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....ssue in favour of the assessee in both the cases. Thus, the addition made by the AO by disallowing the LTCG and treating as unexplained money is deleted. 13. AJAY GOEL vs. I.T.O, WARD 39(5)ITA No. 4481 /DEL/2018 I find that the AO has completed the assessment by relying on the Investigation Report, but the copy of the Investigation Report was not provided to the assessee, despite request made by him in his letter dated 23.12.2016, which is against the law settled by the Hon'ble Supreme Court of India in the case Kishinchand Chellaram vs. CIT 125 ITR 713 at page no. 714; Hon'ble Delhi High Court decision in the case of CIT vs. Ashwani Gupta 322 ITR 396 and CIT vs. Pradeep Gupta 303 ITR 95 and CIT vs. Dharam Pal Prem Chand Ltd. 295 ITR 105. Keeping in view of the facts and circumstances of the present case and respectfully following the aforesaid precedents on identical facts and circumstances, the addition in dispute is deleted and the appeal of the assessee is allowed. 14. Commissioner of Income-tax-I v.Maheshchandr a G. Vakil [2013] 40 taxmann.com 326 (Gujarat HC) Where assessee proved genuineness of share transactions by contract notes for sale and purch....
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....n favour of assessee] Reliance is also placed on following case laws where such purchase and sale were allowed. 18. Commissioner of Income-tax, Jamshedpur v. Arun Kumar Agarwal (HUF)[2012] 26 taxmann.com 113 (Jharkhand HC) Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - AO found that there was unusual rise in price of shares of some of companies and, thus, SEBI had ordered enquiry - In said enquiry, it was found that some share brokers carried out share transactions in violation of norms of SEBI regulations - Since assessee also entered into share transactions with one of such brokers, AO held that assessee's share transactions were bogus - On appeal, it was noted that purchase of shares was shown by assessee in his balance sheet for last five years and genuineness of books of account was never questioned - Further, payment for purchase of shares was made through bank and it was verified from bank statement - Whether in aforesaid circumstances, merely because assessee bonafidely entered into share transactions with one of tainted share brokers would not lead to inference that those transactions were bogus - Held, yes - Whether, therefo....
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.... traded in Calcutta Stock Exchange - Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assessee claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - AO did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by AO - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assessee having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax - Whether on facts, transactions of purchase and sale of shares were to be regarded as gen....
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.... manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity 26. Smt. Sunita Jain, V/s. Income Tax Officer, Ward10 (3), Ahmedabad ITA. Nos: 501 & 502 /AHD/ 2016 AY: 2008-09) The claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account 27. ITO-24(3)(1) V/s M/s Arvind Kumar Jain HUF ITA No. 4862/MUM/201 4 AY: 2005-06 where assessee's broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assessee's share transactions bogus. 1. C.I.T Vs. Mukesh Marolia ITA 456 of 2007-Bombay HC 2. Muksh R Morolia V/s Add CIT(2006)6 SOT 247 28. Kamla Devi S. Doshi V/s. The Income Tax Officer Ward 16(3)(1), I.T.A. No.1957/Mum/2 015 AY: 2006-07 Bogus penny stocks capital gain: The s. 131 statement implicating the assess....
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....) 23. CIT VS Bhagwati Prasad Agarwal ITA No.22/Kol/2009 Calcutta High Court 24. Mr. Shyam R Pawar vs DCIT Central Circle 24 & 26 ITAT Mumbai (ITA No.5585/M/11,5620,5621 & 5622/M/11) 25. CIT (Jamshedpur) vs Arun Kumar Agarwal (HUF) Jharkhand HC 26. PCIT (Ludhiana) vs Sh. Hitesh Gandhi P &H HC 27. ACIT Central Circle-II, Jalandhar vs Hitesh Gandhi ITAT Amritsar [I.T.A. No.129(Asr)/2014] 28. Manish Kumar Baid and Mahendra Kumar Baid vs ACIT, Cir-35, ITA No.1236,1237/Kol/2017[ Kolkata-Tribunal] 29. Shri Jignesh Desai vs Income Tax Officer 35(2), ITA No.1263/Kol/2017) [Kolkata-Tribunal] 30. Navneet Agarwal, Legal Heir of Late Kiran Agarwal vs ITO, Ward-35(3) ITA No.2281/Kol/2017 [Kolkata-Tribunal] 31. Kiran Kothari HUF vs ITO Ward 35(3), Kolkata ITA No.443/Kol/2017 32. Shri Gautam Kumar Pincha vs ITO 34(4), Kolkata (ITA No.569/Kol/2017) 33. Ketulkumar D Jaiswal vs ITO S.K. ward-4 Modasa (ITA No. 546/Ahd/2015 ) [Ahemdabad-Tribunal] 34. CIT-I Jaipur vs Smt Pooja Agarwal, Shri Jitendra 2017 Rajasthan High Court 35. Shri Pramod Jain, Shri Ankit Jain, Shri Sunil Jian, Naina Ja....
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....uch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. 2. Lalchand Bhagat Ambica Dav V/s CIT (37 ITR 28)(SC) Assessment made without disclosing to the assessee the information supplied by the department and without giving any opportunity to the assessee to rebate the information is violation of fundamental rules of justice. 3. DHAKESWARI COTTON MILLS LTD. v. CIT [1954] 26 ITR 777 An assessment so made without disclosing to the assessee the information supplied by the departmental representative and without giving any opportunity to the assessee to rebut the information so supplied and declining to take into consideration all materials which the assessee wanted to produce in support of case constituted a violation of the fundamental rules of justice and called for interference on our part. 4. SETH GURUMUKH SINGH v. CIT [1944] 12 ITR 393 The Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assess....
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....tatement basis. For assessment there has to be some evidence. Income cannot be assessed on mere retracted statement If not material to prove 1. Meghraj Jain V. UOI (Bombay High Court) 2. KailashbenManharlalChokshi v. CIT [2008] 174 Taxman 466 (Guj.) 3. M. Narayanan & Bros. v. Asstt. CIT [2011] 201 Taxman 207 (Mag.) 4. Bansal High Carbons (P)Ltd. 2009) 223 CTR 179 (Del). 5. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H) 6. CIT vs. K. Bhuvanendra and others (2008) 303 ITR 235 (Mad.) 7. Abid Malik Vs UOI, (2009TIOL272HC Del-FEMA) 8. CIT vs. Uttamchand Jain 320 ITR 554 (Bom), 9. Srinivas Naik (2009)117 ITD 201 (Bang) -3 ⮚ Addition cannot be made on assumption basis. There must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law. 1. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC) 2. CIT v. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC) 3. Omar Salay Mohamed Sait V/s CIT 1959 37 ITR 151 (SC) 4. DhirajlalGirdharilal V/s CIT (26 ITR 734) (SC) 5. Dr. Anita Sahai V/s DIT ....
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....ITR 638 (Gauhati) which had come up before the Gauhati High Court purchased jackpot tickets on combination worked out by her on basis of advice given by her husband. She had allegedly won 16 jackpots besides trebles. Assessing Officer disbelieved here version and taxed amount as income from undisclosed sources. The settlement commission by its majority order upheld assessment order holding that it was reasonable to infer, on facts, that assessee did not participate in races but purchased winning tickets after events with unaccounted money ..... the Assessing Officer noticed that the capital gains shown by assessee were more than 24 times of purchase value in just 22 months of purchase. He asked the assessee to furnish details of transactions including demat account, bank statement etc. Since the assessee could not produce any evidence of purchase & sale of shares, Assessing Officer treated said income as income from undisclosed sources. The Hon'ble Tribunal allowed the claim of assessee on ground that there was no material on record to show that what assessee had claimed as regards value of shares was factually incorrect. On an appeal by the Revenue, the Hon'ble Gauhati ....
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..../s 69C of the Income Tax Act, 1961. However, the Ld. AO without considering any the material facts erred in adding Rs 4,13,037/- merely on the basis of information obtained from the office of Kotkata Investigation Directorate stating that the scheme was to route the unaccounted money of LTCG Beneficiaries into their account/books in the garb of Long Term Capital Gains. Ld. AO has not conducted any enquiry, to prove the above LTCG is made from concerns to be non-genuine. Hence, addition is made on adhoc basis. The Ld. AO does not appreciate the fact that the assessee has provided all documents to prove beyond doubt the identity, genuineness and creditworthiness of the transactions. In light of the above, we request your honour to provide relief to the assessee by deleting the additions made by the Ld. AO. GROUND NO. 3 The Ld. Assessing Officer erred in charging interest u/s 234A, 234B and 234C of the Income Tax Act, 1961. Thus on the facts and circumstances of the case the Ld. AO erred in charging interest under sec 234A, 234B and 234C of the Act. HUMBLE PRAYER In view of the above facts, circumstances ....
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....gistered broker and were held in a Demat account. The entire transaction was delivery-based, and ultimately the stocks were sold on a recognized stock exchange on which STT was also paid. 7. It is an undisputed fact that the holding period of the shares exceeded 12 months, and the entire trail of the shares in question was through banking channels. On the contrary, the assessment of the assessee was reopened only on the basis of information received from the DGIT (Investigation), Kolkata. During the entire assessment proceedings, the AO could not bring on record any proof of cash payments or unexplained deposits, nor was any link established between the assessee and the alleged entry operators. The transactions recorded in the books and Demat account could not be rebutted. 8. We also noticed that the assessee is a regular investor and has placed on record details of regular investments in shares (Paper Book pages 101- 102). In the present case, the assessee purchased one lakh shares of M/s Unisis Software and Holding Industries Ltd. for Rs. 25,57,949 through a SEBI-registered broker. Copies of bills-cum-contract notes are placed on record (Paper Book pages 17-73). It is an un....