TaxTMI 
TaxTMI 
2026 (9) TMI 1701
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....on 69 of the Act and applying Section 115BBE of the Act thereto for taxation purposes; (v) Omitting to consider cogent and irrefutable evidence submitted with regard to all of the above points. 2. At the time of hearing, ld. AR of the assessee brought to my notice the relevant facts and his submissions are as under. He submitted that the assessee filed his return of income on 03.09.2015 declaring an income of Rs. 3,73,370/-. The assessment was completed by the ITO, Ward 70(4), New Delhi on an income of Rs. 48,30,955/- after making two additions i.e. (i) under section 68 of the Income-tax Act, 1961 (for short 'the Act') for long term capital gains and (ii) for commission expenses u/s 69C of the Act. The grounds taken in appeal relate to those additions which were made in assessment. 3. He submitted that the first ground pertains to the addition made by the AO denying exemption u/s. 10(38) of the Act for long term capital gains earned on the sale of shares by the assessee. The AO invoked Section 68 of the Act for making the addition after denying the claim for exemption u/s 10(38) of the Act as having been contrived. He brought to our notice the operative part of the A....
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....d as a deal member. In the absence of any evidence to that effect, there is no logical ground for the AO to take any valid Objection. The purchase transaction for all IPOs is invariably routed through accredited brokers of the stock exchange. All brokers act as the market markers for the public issues handled by them in an IPO. The AO failed to appreciate that all IPOs require a robust support and a vigorous push in the share market to get it fully subscribed. It is for generating such a push in the public domain that the Companies appoint several brokers for the IPO. To prevent anything untowards, underwriters are appointed to safeguard against unforeseen eventualities. 8. He further submitted that the AO also takes objection to the fact that the assessee's sole purchase was of the shares of HPC Biosciences Ltd. That objection has no sense for there is nothing in law or in commercial practice or human conduct and behaviour which would make it imperative for any investor to invest in shares of multiple companies so as to qualify the investments as genuine. 9. He submitted that the AO concedes that the assessee was an amateur investor. However, in the same breadth, the AO ....
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....action was irregular or otherwise infected. 13. He submitted that this assessee himself has never been marked or stigmatised in any manner by SEBI. This Assessee had participated directly and independently in the IPO. The shares were allotted as per the mandatory approval of the Stock Exchange. It is those shares allotted to him in the IPO which were sold later in the subject year through screen trading. Both at the time of purchase of shares and at the time of sale of shares there was never any one-to-one contact with the other party to the deal. Both the transactions of purchase and sale were not only anonymous but were instant and entirely at arms length. Ex consequenti, the Authorities below were wrong in ascribing motives to the transactions and stigmatising them. 14. He further submitted that the other objection of the AO that the Assessee has not been investing regularly and so this set of transactions cannot be said to be genuine is based on hunches and private opinion of the AO. Being so, it does not deserve any consideration but must be ignored. 15. Ld. AR further submitted that the ld. CIT(A) has passed a mechanical and non-speaking order in the case of the asse....
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....ere the purchases of shares is not off-market and is through banking channels and the sale of shares is through screen-trading and the sale consideration is received through banking channels, the transaction cannot be held to be either spurious or as a make-believe. In this regard, he relied on the authority of the decision of the Apex Court in the cases of Pr. Commissioner of Income Tax v. Tejua Rohitkumar Kapadia (2018) 256 Taxman 213(SC); PCIT v. Parasben Kasturchand Kochar (2021) 282 Taxman 301 (SC); PCIT v. Kishore Kumar Mohapatra (2025) 475 ITR 198 (SC); PClT v. Kuntala Mohapatra (2024) 466 ITR 50 (SC), where they have confirmed the orders of the Hon'ble Orissa & other High Courts on similar points. 19. He submitted that ITAT, "G" Bench, New Delhi had an occasion to consider the nature of the transactions in the IPO of the shares of HPC Biosciences Ltd. in the ITA No. 8142/De1/2018 by a similar investor namely, Sh. Tapas Kumar Mallick and placed on record a copy of that order. He submitted that a perusal of the order of the ITAT would show that the transactions leading to the subscription in the shares of HPC Biosciences Ltd. by the investors in the IPO (public issue) ....
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.... that order is placed on record, which Is self-explanatory and is relied upon. 22. He submitted that be that as it may, the objection by the Revenue Authorities has been taken in the ground not only for denying the exemption u/s. 10(38) of the Act for the long term capital gains but also by the invocation of Section 68 of the Act for foisting the addition. The said Section could have been invoked if only the explanation offered by the assessee as to the receipt of the sale consideration for the shares was a debt owned by him to another person. In the subject case, the sale consideration received for shares is undeniably through screen-trading and is entirely for the benefit and ownership of the assessee. The sale proceeds have been credited directly to the bank account of the assessee relating to the old demat account. That sale itself became possible on account of the debit of those shares from the demat account of the assessee. The shares themselves were admittedly acquired by the assessee in the preceding year. The acquisition of the shares in the preceding year by the assessee is beyond denial which in fact the AO also concedes when he traces their origin as emanating from t....
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....the financials of the company may not be commensurate with the purchase and sale price in the market. The assessee has purchased the shares from authorized dealers, subsequently, sold the same in the stock exchange. However, there is no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the Revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiaries in these transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without there being any material against the assessee. We observed that similar issue was considered by the coordinate bench in the case of Shri Tapas Kumar Mallick (supra) and decided on the issue of same script and consi....
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....de pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were is....
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....reponderance 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 matrix at....
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....r, within three months from the date of this Order. ii. BSE to facilitate valuation of shares to be purchased as directed at (i) above, and compulsorily delist the Company, if the public shareholding reduces below the minimum level in view of aforesaid purchase. iii. The Noticee no. 1 is hereby restrained from accessing the securities market by issuing prospectus, offer document or advertisement soliciting money from the public in any manner for a period of 8 years. iv. Noticee no. 2 and 3 are hereby restrained from holding post of director, any managerial position or associating themselves in any capacity with any listed public company and with any public company which intends to raise money from the public, or with any intermediary registered with SEBI for a period of 3 years. v. The Noticees, as mentioned below are hereby restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in any manner whatsoever manner, for the period specified in their respective columns: ................... 23. This SEBI order is dated 22.12.2020 whereas the transactions which have been cons....
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....al)-1 vs. NRA Iron & Steel (P.) Ltd. 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. 6. The appeal is devoid of merits and it is dismissed with no order as to costs." 12. Further, Hon'ble Delhi High Court in the case of Pr. CIT v. Smt. Krishna Devi in ITA 125/2020 dated 15.01.2021 held as under: - "8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as th....
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.... which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion tha....
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....e 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 matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns ITA 125/2020 and connected matters on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax auth....