TaxTMI 
TaxTMI 
2026 (9) TMI 855
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.... the assessee had traded in one of the penny scrips, namely Cupid Trade and Financials Ltd., and claimed bogus long-term capital gains. The Assessing Officer issued a show cause notice to the assessee stating that the investigation team revealed that the brokers were involved in providing accommodation entries and rigging the share prices and one such scrip was Cupid Trade and Financials Ltd., and the assessee availed only an accommodation entry and claimed bogus long-term capital gains and thus proposed to make an addition of Rs. 35,97,610/- and also the profit element at the rate of 8%, being commission income, which was alleged to be paid in such transaction. The assessee furnished her reply vide letter dated 08.12.2016 stating that the price fluctuation in the stock market is merely dependent on the basis of the turnover and profit or earning per share. It was submitted that the assessee had no control over fluctuation in the stock prices and the assessee is a genuine investor and provided contract notes evidencing purchase of shares through stock exchange, the details of the demat account and the shares held in demat account till the date of sale. The assessee also provided th....
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....ich was also disclosed in her capital account and balance sheet. The assessee also explained that the shares purchased in 2010 were retained for more than three years, and even in the intervening period, the price of the shares reached Rs. 278/-. However, the assessee did not sell the shares. The Ld. Counsel further submitted that even if the allegation and presumption of the Assessing Officer is to be believed that the assessee had entered into fictitious transactions to earn bogus long-term capital gains, then she should have sold the shares as the holding period for long-term capital gain is only one year and the price was five times more than the purchase cost. However, the assessee did not sell the shares and retained them for a period of more than three years and sold the shares at a much lower price of Rs. 145/- to Rs. 160/- per share. Therefore, the transactions of purchase of shares by the assessee are genuine. There is no involvement of the assessee in price fluctuations rigging of prices of the shares. The Ld. Counsel for the assessee submitted that there is no justification by the Assessing Officer in treating long-term capital gains as bogus, merely placing reliance on....
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....g the shares for so long, i.e., more than three and a half years, shows that the intention was not to claim any bogus long-term capital gains. The assessee is a genuine investor and the fluctuation in the price of the said scrip is beyond the control of the assessee and more once either the investigation Wing or the AO placed any material on record to suggest the involvement of the Assessee in manipulating the share prices in the market. 8. The Hon'ble Gujarat High Court in the case of PCIT vs. Sanjaykumar Damjibhai Gangani (supra) held as under: "[14] Learned Senior Standing Counsel Mr. Karan Sanghani for the appellant reiterated the submissions made before the Tribunal and submitted that the Assessing Officer, after analyzing the data made available from the Bombay Stock Exchange, came to the conclusion that the price of script, which the assessee sold, was fluctuating by 24 times and after sale of shares made by the assessee, the price has reduced to Rs. 0.49. It was, therefore, submitted that the Assessing Officer, taking into consideration the volatility of the share price of the script sold by the asssessee, was justified in relying upon the report of the Inve....
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....he shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span. 6. The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was longstanding and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed. 6.1 On the facts of case, no question of law much less substantial question of law arises. 7. Resultantly, appeal is dismissed." [17] In view of the above, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order passed by the Tribunal. The appeal, being devoid of any merit, is, accordingly, dismissed." 9. SLP filed by the Revenue against this judgment was also dismissed by the Hon'ble Supreme Court. We find that the Coordinate Bench of the Tribunal in the case of Suresh Maheswari vs. DCIT in ITA No. 3370/Mum/2025, dated 29.10.2025 held as under: "4. We have heard learned DR, gone through th....
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....fact that the assessee has knowledge of the share market and well acquainted with share transactions cannot be brushed aside. On a reading Suresh Maheshwari of the assessment order, it is very much clear that the entire decision-making process of the AO is based on the Investigation Wing Report. 6. From the assessment order it transpires that the AO has not conducted any independent enquiry to further corroborate the allegations made in the Investigation Wing Report. The limited investigation made by the AO worth its name is, he has referred to the financial statement of the M/s. Pine Animation Ltd. downloaded from the website and recorded a statement u/s. 131 of the Act from the assessee. The financial statement of the M/s. Pine Animation Ltd. can at best be a starting point of the investigation but cannot be made basis for making the addition. In so far as the statement recorded u/s. 131 of the Act, we do not notice any ambiguity in the replies of the assessee. The assessee has clearly and categorially asserted that not only is he well acquainted with equity market and is regularly investing/trading in scrip but the choice of investments is as per his own decision. Furth....
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....ere initially debarred from accessing stock market, but the same has been revoked by the SEBI, vide its order dated 19th September, 2017. The following observations made by the SEBI in the above said order are worth "10. Considering the fact that there are no adverse findings against the aforementioned 114 entities with respect to their role in the manipulation of the scrip of PAL, I am of the considered view that the directions issued against them vide interim order dated May 08, 2015 which were confirmed vide Orders dated June 02, 2016, July Suresh Maheshwari 05, 2016, August 22, 2016 and June 02, 2017 need not be continued." 11.1. We noticed earlier that the assessee has sold the shares during the period from June 05, 2014 to September 15, 2014. Thus, the transactions of purchase and sale of shares by the assessee have happened prior to the passing of initial order by SEBI, which has been later revoked. Hence, we are of the view that the transactions of purchase and sale of shares of M/s. Pine Animation Ltd., by the assessee would not be affected by the above said orders of the SEBI. 12. In the statement recorded from the assessee, she has stated that ....
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....l question of law. The Appeal, therefore, be 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 cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed. 5. We have peruse....
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....00 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 DAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. Suresh Maheshwari The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded t....
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....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 that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 15. Further, in the case of CIT vs. Jamnadevi Agarwal (20 taxmann.com 529 (Bom), the Hon'ble Bombay High Court has held that the transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. In the case of PCIT vs. Indravadan Jain (HUF) (ITA No. 454 of 2018)(Bom), the broker through whom, the assessee had carried out the transactions have been alleged to have been indulged in price manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the s....
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....be decided on the basis of facts prevailing in each case. In the earlier paragraphs, we have followed the binding decision rendered by Hon'ble Bombay High Court. Hence, the Ld. DR cannot place reliance on the decision rendered by Hon'ble Kolkatta High Court in the case of Swati Bajaj (supra). Accordingly, we are of the view that the decision rendered in the above said case cannot be taken support of by the Revenue. 17. In view of the foregoing discussions, we are of the view that the Ld CIT(A) was justified in deleting the addition of value of sale consideration arising on sale of shares of M/s. Pine Animation Ltd. Since we have confirmed the decision of Ld CIT(A) in holding that the sale transactions of shares cannot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to be deleted. Accordingly, we confirm the order passed by Id. CIT(A). 18. In the result, the appeal of the Revenue is dismissed." 8. The issue in dispute at hand is squarely covered by the aforesaid decision of the Coordinate bench. Therefore, respectfully following the said decision, we accept Suresh Maheshwari assessee's claim of exemption ....