Income Tax Appellate Tribunal - Mumbai
Assisstant Commissioner Of Income ... vs Keshavji Nongha Shah, Mumbai on 30 September, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "E", MUMBAI
BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER
AND
SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER
ITA No.3179/M/2024
Assessment Year: 2015-16
Assisstant Commissioner Of Shri Keshavji Nongha
Income Tax, Circle - 20(1) Shah
6th Floor, R. No. 615, M/s. Ankur Harganga
Piramal Chambers, Vs. Mahal, Khodad Circle,
Lalbaug, Lower Parel Dadar T.T.
Mumbai - 400012 Mumbai - 400014
Maharashtra
PAN: AAEPS6097B
(Appellant) (Respondent)
Present for:
Assessee by : Shri Nishit Gandhi, A.R.
Revenue by : Shri P.D. Chougule, (Addl.CIT) SR.
D.R.
Date of Hearing : 08 . 08 . 2024
Date of Pronouncement : 30 . 09 . 2024
ORDER
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Revenue Department against the order dated 18.04.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short 'the Act') for the A.Y. 2015-16.
2 ITA No.3179/M/2024Shri Keshavji Nongha Shah
2. Brief fact relevant for adjudication of the appeal are that on 12.06.2012 the Assessee has purchased 2 lakh shares of the company i.e. M/s. Global Infratech & Finance Ltd. previously known as Asianlac Capital and Finance Ltd. @ Rs.15 per share through banking channel i.e. vide cheque No.026471 dated 30.05.2012 amounting to Rs.30 lakh drawn on Dena Bank. The Asianlac Capital and Finance Ltd. (in short "ACFL") vide allotment advice dated 12.06.2012 allotted 2 lakh shares on a consideration of Rs.30,00,000/- vide portfolio No. K01011 certificate no. 0025322 distinctive Numbers 18690301 to 18890300 through Magnum Equity Broking Ltd. Subsequently the Assessee on dated 17.08.2012 dematerialized the said shares as it appears from the transactions' statement filed by the Assessee (page No.13, 15 &
20). Thereafter on 13.12.2012, the shares were splitted in the ratio of 1:10 and consequently, the Assessee got entitled to 20 lakh shares. The Assessee from 2nd May 2014 to 11th July 2014 sold 1212000 shares though recognized stock exchange/ online platform on a consideration of Rs.3,18,41,259/- as against the purchase amount of Rs.18,18,000/- and consequently earned the capital gain of Rs.3,00,23,259/- as detailed below and claimed the same as exempt u/s 10(38) of the Act.
Scrip name: Global Infra and Fin Limited
(Erstwhile Asianlak Cap)
(Scrip code: 531463)
Buy Sell
Date of quantity rate amount quantity Rate Amount Gain
Purchase /
sale
15.05.2012 1212000 1.5 1818000
02.05.2014 108000 4906148.40
3 ITA No.3179/M/2024
Shri Keshavji Nongha
Shah
17.06.2014 10000 2628680.01
04.06.2014 70000 2900051.00
05.06.2014 34000 1338930.20
25.06.2014 300000 6836580.00
18.06.2014 150000 3748125.00
26,06.2014 150000 3335835.01
27.06.2014 200000 4367826.00
11.07.2014 100000 1800090.00
12 12000 1.5 1818000 1212000 26.27 31841259.62 30023259.62
3. The AO by considering the claim of the Assessee u/s 10(38) of the Act to the tune of Rs.3,00,23,259/-, disallowed the same and added in the taxable income of the Assessee u/s 68 of the Act, by concluding as under:
"That information has received with regard to the investigation carried out by Kolkata Investigation Directorate into 84 penny stocks including M/s. Global Infratech & Finance Ltd. being one of it, that entry of LTCG by selling the shares of penny stock companies and by rigging the prices of the shares and the sale of shares by the Assessee as prearranged method employed by the Assessee in connivance with operators to evade taxes, as the Assessee mainly traded in single scrip which was purchased in May 2012 and sold in the month of May 2014 to July 2014 and the price of the share was jacked up to Rs.84 in 22 months. The financial health of the company and net worth was negligible. Investigation in the case of operators was carried out wherein their statements have been recorded, who accepted that they have arranged investment in the shares in this company on behalf of some of the beneficiaries who wanted to reap LTCG in future. Letters issued u/s 133(6) of the Act to the purchasers of the shares calling for the details of the sale/purchase with the Assessee during the year, Demat account details, period of holding of shares and source of funds and return of income but the letters were returned unserved by the postal authority with remarks "not known". Analysis of cash trail, SEBI report and its finding qua accommodation entry providers, mode of acquisition of shares, sale of shares and unusual rise in the price, failure of the Assessee to discharge his onus, ignorance of the Assessee about shares and penny stock companies, financial analysis of penny stock companies, cash trail in the accounts of the entry providers are against the Assessee",
4. The Assessee, being aggrieved, challenged the aforesaid addition made by the AO before the Ld. Commissioner and filed the following documents in support of his claim:
4 ITA No.3179/M/2024Shri Keshavji Nongha Shah
1. Copy of contract note
2. Dmat statement
3. Form 10DB
4. Global report
5. Bank statement
6. Ledger account of the broker
7. Balance sheet
8. Letter of allotment of shares
9. Share certificate 4.1 The Assessee before the Ld. Commissioner also demonstrated that he has filed the following documents before the AO as well:
1. Copy of contract note
2. Dmat statement
3. Form 10DB
4. Global report
5. Bank statement
6. Ledger account of the broker
7. Balance sheet etc. 4.2 The Ld. Commissioner by considering the aforesaid documents as well as the SEBI report and the peculiar facts and circumstances in totality, found the case of the Assessee as genuine and therefore deleted the addition made by the AO by making detailed order, reproduced herein below for the sake of brevity and ready reference:
"I have gone through the above submissions of the Appellant and have considered the facts and evidence on record.
In the present case the appellant filed the return of income for the assessment year 2015-16 on 17/10/2015 declaring total income at Rs. 53,60,760/-. Later the AO completed the assessment by assessing total income at Rs. 3,53,84,022/- by disallowing the LTCG of Rs 3,00,23,260/- claimed exempt u/s 10(38) of the act and added back towards his taxable income under section 68 of the act. Penalty proceeding u/s 271(1)(c) were initiated for furnishing inaccurate particulars of income with a view to concealment of income. Being aggrieved by the same the appellant preferred instant appeal.
The AO stated that as per working of long term capital gain attached with return of income, he has shown gain of Rs. 3,00,23,260/- on sale of shares during the year which has been 5 ITA No.3179/M/2024 Shri Keshavji Nongha Shah claimed exempt u/s 10(38) of the I.T. Act. This quantum of huge long term capital gain was found suspicious and detailed investigation of this issue was undertaken. Various tools available were examined including ITD data, BSE data, moneycontrol website, court rulings, interact as well as investigation wing report and findings of the SEBI.
The AO stated that after analysis and due examination of records, it was found that long term capital gain of Rs. 3,00,23,260/- shown in the return as the sale of shares of 'Global Infra' was pre-arranged method employed by the appellant in connivance with operators to evade taxes. Appellant has mainly traded in single scrip. The scrip was purchased in month of May, 2012 and was sold in the month of July 2013 to January 2014. M/s Global Infra and Infra and Fin Limited (Formerly Asianlak Cap) (Scrip code: 531463) Total 200000 shares were bought on 12.06.2012 at the face value of Rs (15) per share. Subsequently the existing shares were split i.e. Sub Divided in the ratio of 1:10 on 13.12.2012 so that every ONE equity share of Rs.10/- each was split into TEN equity shares of Rs.1/ each. All the 788000 shares were sold off from July 2013 to January 2014 at the BSE at the average rate of Rs 89 approx to various entities for a total sale of Rs. 70413977/- resulting into LTCG of Rs. 3,00,23,260/-.
All the financial details of company for the relevant period were verified. Balance sheet, profit and loss account, trading pattern of this scrip in share market and financial analysis of this scrip was undertaken. This company was having market price of share at around Rs. 0.69 for the share having face value of Re 1 in January, 2012. Thereafter, the price was jacked up to Rs. 84 from Rs 0.69 in 22 months that is till December, 2013. Thus, within in 22 months the price was jacked up nearly 121 times. After that the price was maintained in the range of Rs. 77 to Rs.81. So that the interested beneficiaries were able to book the long-term gains. After that the price was made to fall freely so that interested beneficiaries who had booked at high market price can avail bogus short-Term Capital Loss. Thereafter the prices have gone down to merely Rs.9.60.
Even though the networth of the company and the business activity of the company is negligible the share prices have been artificially rigged by the group of operators including Shri Anil Agarwal of Mumbai to accommodate beneficiaries seeking long term capital gain and losses. No prudent businessman and particularly trader or investor in stock will invest in such penny scrip which is defunct and inoperative.
The Investigation Directorate at Kolkata had undertaken investigation into 84 penny stocks (Global Infra being one of it) and has given detailed findings indicating bogus LTCG/STCL 6 ITA No.3179/M/2024 Shri Keshavji Nongha Shah entries claimed by large number of beneficiaries. The modus operandi involving operators, intermediaries and the beneficiaries has been detailed in the investigation report prepared and disseminated by the Kolkata Directorate. Similar investigations were also conducted by the Directorate of Investigation at Mumbai and Ahmedabad.
The basic aim of this dubious scheme was to route the unaccounted money of LTCG Beneficiaries into their account/books in the garb of Long Term Capital Gain. This entry of LTCG is taken by selling the shares on the stock exchange and registering the proceeds arising out of the sale of shares into the books as LTCG. For implementing this scheme, shares of some Penny Stock Companies were used. The same modus is adopted for providing accommodation entry of bogus LOSS. In this scheme, the shares of the penny stock companies are acquired by the beneficiaries of LTCG at very low prices through the route of preferential allotment (private placement) and off market transaction. These shares have a lock-in period of 1 year as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Another route to acquire the shares is through Amalgamation or merger. In this route, the beneficiaries of LTCG are allotted shares of a private limited company which is subsequently amalgamated with a listed penny stock and the beneficiaries receive shares of the listed penny stock in exchange of the shares of private limited company. The shares in some cases were acquired through stock exchange. These shares were then split and bonus shares were issued to increase the volume. Thereafter, the prices of the shares of the penny stock companies are rigged and are raised through circular trading. This is managed by the "operator" of the scrip.
Once the period of 1 year has passed and the share prices have been sufficiently rigged, the beneficiaries sell their shares at the inflated prices on the Stock Exchange. A point worth noticing here is that the purchase of the shares is not made by the public but by the bogus entities managed and controlled by the promoter of the penny stock company or the operator which are referred to as "Exit Providers. The unaccounted money of the beneficiaries is routed to these bogus entities "Exit Providers" and the shares held by the beneficiaries are bought by these bogus entities from the money which is the unaccounted money of the beneficiaries. Sometimes, the shares of the LTCG beneficiaries are purchased by the beneficiaries of LOSS who later sell their shares when the price falls and hence book bogus LOSS in their books.
A search action has been conducted by Directorate of Investigation, Delhi on Shri Raj Kumar Kedia who is a delhi based entry operator. Shri Raj kumar Media has stated in his statement that the shares of Global Infratech and Finance Limited 7 ITA No.3179/M/2024 Shri Keshavji Nongha Shah have been used for providing accommodation entry of bogus LTCG.
The trading in the shares of M/s. Global Infratech& Finance Ltd (formerly known as Asianlac Capital and Finance Ltd) had been suspended on BSE till 18/11/2011. After the suspension was revoked, M/s. Global Infratech& Finance Ltd (formerly known as Asianlak Capital and Finance Ltd) raised Rs. 30,53,25,000/- by way of preferential allotment of 2,03,55,000 shares to preferential allottees in two rounds of allotment. In the first round of allotment, 1,05,05,000 shares were allotted on 19.01.2012 at a value of Rs.15/- per share (Face Value Rs. 10/- and premium of Rs.5/-). These shares were locked in till 18.01.2013 as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. These shares were listed on the Exchange on 28.02.2012. In the second round of preferential allotment, 98,50,000 shares were allotted on 12th June, 2012 at a value of Rs.15/- per share (Rs. 10/- FV and premium Rs. 5/-). These 98,50,000 shares were locked in till 11.06.2013 as per Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. These 98,50,000 shares were listed on Exchange on 24.07.2012. The price of the shares saw a phenomenal rise immediately after the preferential shares were allotted. Subsequently the existing shares were split i.e. Sub Divided in the ratio of 1:10 on 13.12.2012 so that every ONE equity share of Rs.10/- each was split into TEN equity shares of Rs. 1- each.
Subsequently, there was a bonus issue in the ratio of 1:10 on 14.11.2014 whereby for every 10 share held by the shareholders they were allotted 1 more share of M/s. Global Infra tech& Finance Ltd (formerly known as Asianlac Capital and Finance Ltd).
The AO stated that the appellant resorted to a preconceived scheme to procure long-term capital gains by way of price difference in share transactions not supported by market factors. The order of SEBI has also given the similar finding that the prices of the shares were determined artificial by manipulations and cannot be a product of market factors and commercial principals, Failure of Assesses to discharge his onus, Ignorance of the appellant about shares and penny stock companies, Cash trail in the accounts of the entry providers, the transactions entered by the appellant involve the series of preconceived steps, the performance of each of which is depending on the others being carried out.
The appellant stated that in response to the notices issued by the AO he had furnished the complete details and evidence including contract note for purchase and sale of shares, demat 8 ITA No.3179/M/2024 Shri Keshavji Nongha Shah account, Bank statement, Global Report, Broker Ledger etc. in respect of Long-Term Capital Gain which has been claimed exempt under section 10[38] of Income Tax Act, 1961. He has also requested for the cross verification of the persons on whose statement the AO was relying for making addition.
The appellant further stated that the AO has not referred to any tangible material, which came into his possession, based on which, he has came to the conclusion that income has escaped assessment. When the allegation of the investigation wing is that the appellant has received bogus entries of LTCG is not a correct or cogent reason to believe that the Appellant has taken bogus entry has been routed through the said broker. The report of the Directorate of Investigation wing, Kolkata, has been accepted by the Assessing Officer, without independent application of mind. No reference has been made to any material gathered by the investigation wing, either by way of statements or by way of bank statement/evidences etc. There is no prima facie material, to take a prima facie view that the appellant's has been benefited in any way via bogus entry. Under the above circumstances, the reasons recorded for reopening in our view does not stand the tests laid down for sustaining the reopening. AO has not verified the transactions and in a mechanical manner without verification of records had issued notice under section 148 of the Income Tax Act, 1961. It can be safely concluded that the reopening has been done on the basis of information available with the Investigation Wing, without any base or verification of records and therefore liable to be quashed. In none of the Investigation, he has been named as either operator or accused of converting black money into white. No other evidence except the above reports which itself are general in nature [not pointing out at the appellant in particular) was available with the Assessing Officer to reject his claim in respect of Long-Term Capital Gain. There are no circumstantial as well as direct evidence against him to prove that, Long Term Capital Gain shown is not natural one but arranged one. There is no mention as to how has he connected the scrip investigated by Kolkata Directorate and that he is an accommodation entry beneficiary.
The Hon'ble Gujarat High Court in case of Commissioner of Income-tax-I Vs. Himani M Vakil [2013]10 taxmann.com 326 (Gujarat) held that where assessee duly proved genuineness of share transactions by bringing on record contract notes for sale and purchase, bank statement of broker and demat account showing transfer in and out of shares, Assessing Officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit.
The appellant had furnished the complete details and evidence including contract note for purchase and sale of shares, 9 ITA No.3179/M/2024 Shri Keshavji Nongha Shah demat account, Bank statement, Global Report, Broker Ledger etc. in respect of Long Term Capital Gain which has been claimed exempt under section 10[38] of Income Tax Act, 1961.
In case of DCIT vs Sunita Khema in ITA nos 714 to 718/ kol/2011 Tribunal at Kolkata has held that :-
The AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and demat statements and Account Payee Cheques cannot be treated as bogus.
Hon'ble Delhi High Court in the case of I.T. A. 125/2020, Ι.Τ.Α. 130/2020 and I.T.A.131/2020 has dismissed the appeal of ITAT stating :
"That Court has to decide an issue on the basis of evidence and proof and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the respondent. It was further held by Court that, reliance placed on Suman Poddar vs. ITO and Sumati Dayal vs. CIT is of no assistance and held that this case is quite different from the factual matrix at hand. Similarly, the case of Suman Dayal vs. CIT (Supra] too turns on its specific facts. It was held that there cannot be addition without any cogent material on record. Statements relied by the Assessing Officer in the assessment proceedings were not recorded by the Assessing Officer but they were preexisting statements recorded by the Investigation Wing and the same cannot be sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opinion, neither the Assessing Officer conducted any enquiry nor has brought any clinching evidence to disprove the evidences produced by the assessee. The report of the Investigation Wing is much later than the dates of purchase / sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhere SEBI has declared the transaction at earlier dates as void".
The order dated 21/09/2017 passed by the Securities and Exchange Board of India under section 11, 11[4] and 11B of the Securities and Exchange Board of India Act, 1922 in the matter of Kailash Auto Finance Ltd has been revoked the order passed by them on various dates against the various appellant and others 10 ITA No.3179/M/2024 Shri Keshavji Nongha Shah with immediate effect. Para 5 of the order which is reproduced here under: -
"Pursuant to the interim order, SEBI conducted a detailed investigation into the role of various entities in price manipulation in the scrip of Kailash Auto so as to ascertain the violation of securities laws. Upon completion of investigation by SEBI, investigation did not find any adverse evidence/adverse findings in respect of violation of provisions of the PFUTP Regulations in respect of the following 244 entities (against whom directions were issued vide the interim order and/or conformity orders) warranting continuation of action under section 11B r/w 11(4) of the Act. The details of the 244 entities are as follows"
Thus, the SEBI has taken a back foot in the matter and therefore the addition made on the basis of enquiry by SEBI is liable to be quashed as the very basis on which the addition has been made is revoked.
The Hon'ble ITAT, Kolkata in the Dolarrai Hemani vs. ITO (ITAT Kolkata) I.T.A No. 19/Kol/2014 vide order dated 02/12/2016, held that the fact that the stock is thinly traded and there is unusually high gain is not sufficient to treat the long-term capital gains as bogus when all the paper work is in order. The revenue has to bring material on record to support its finding that there has been collusion / connivance between the broker and the assesse for the introduction of its unaccounted money.
The Hon'ble High Court in the case of PCIT v Parasben Kastur chand Kochar[130 taxmann.com 176 of 2020] held that : -
1. This appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act 1961") is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench dated 20-2- 2020 in the ITA No.549/Ahd/2018 for the A.Y. 2014-
15. The Revenue has proposed the following question of law for the consideration of this Court: "Whether the Appellate Tribunal was right in law and on facts in deleting the addition of Rs.9,70,468/- made on account of LTCG claimed as exempt u/s. 10(38) of the Act without appreciating the fact that the transaction was pre-
arranged as well as sham and was carried out through penny scripts companies/paper companies?"
2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:11 ITA No.3179/M/2024
Shri Keshavji Nongha Shah "9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long-
term capital gain.
10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee.
11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No.62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. Vs. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."
3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant.
4. We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under Section 260-A of the Act, 1961.
5. In the result, this appeal fails and is hereby dismissed.
12 ITA No.3179/M/2024Shri Keshavji Nongha Shah The AO had stated "During the investigation statements of various operators, entry providers and the stock brokers were recorded where they have admitted of providing the accommodation entries in the form of LTCG/STCL". The appellant should have been allowed to cross-examine the various persons who have admitted that the appellant has indeed obtained an accommodation entry, inasmuch as they are the witness of the Department and the appellant has specifically requested the Assessing Officer for such cross examination. The Assessing Officer has neither granted the cross examination nor has he provided any material to the appellant on the basis of which such conclusion was reached and instead made the impugned addition.
The appellant has duly discharged the onus that lied upon him by establishing the identity, creditworthiness and genuineness of the transactions, by way of submissions made by him during the assessment proceedings and that being so, it is for the revenue to disprove the claim of the appellant, by bringing on record the evidence to the contrary.
The AO has not brought any cogent evidence on record to prove that transactions were not genuine and that the appellant is a beneficiary of accommodation entry. AO has proceeded to arrive at his conclusion that the appellant has obtained accommodation entry solely based on assumptions and presumptions, which Courts have held have no place in framing an assessment under the Income-tax Act. The AO has not taken into account the evidences filed by the appellant to prove the genuineness of transactions.
In view of the above, these grounds of appeal are, accordingly, allowed and the addition made by the AO on this account is, hereby, deleted.
6. In the result, the appeal is allowed. In the result, the appeal is decided as above.
7. This order has been passed under Section 250 read with Section 251 of the Income Tax Act, 1961."
5. The Revenue Department being aggrieved is in appeal before us.
6. The Ld. D.R. at the outset has submitted that the Ld. Commissioner has not appreciated the facts of the case and modus operandi, as a detailed investigation has been carried out by the 13 ITA No.3179/M/2024 Shri Keshavji Nongha Shah Investigation Wing in the scrip of M/s. Global Infratech & Finance Ltd. Further, the Assessee with a view to evade taxes has created artificial gains and the shares of penny stocks are not governed by the market factors prevalent at relevant time, rather the transactions are product of design and mutual connivance on part of the Assessee and Operators. Further, the Ld. Commissioner sidelined the statement of various relevant persons, who admitted that these companies were indulged in accommodation entries, abnormal rise in price over short period, cash trails in the accounts of operators etc. Further, the Ld. Commissioner erred in ignoring the decision in the case of Sumati Dayal vs. CIT 214 ITR 80, CIT v. Durga Prasad More 82 ITR 540 (SC).
7. On the contrary the A.R. refuted the claim of the Revenue Department, by demonstrating documents, facts and circumstances in support of the Assessee's case.
8. We have heard the parties and given thoughtful considerations to the peculiar facts and circumstances of the case. Admittedly the Assessee had purchased shares under consideration on 12.06.2012 through banking channel and subsequently on 17.08.2012 got dematerialized the same as it clearly appears from the demat transactions' statement filed before us as well as before the authorities below. Further, the Assessee has also produced the documents as produced before the authorities below such as copy of contract note, Demat statement, Form 10DB, Global Report, Bank statement, Ledger account of the broker, Balance sheet, Letter of allotment of shares and Share certificate etc. in order to justify his claim. We observe that the Assessee has not sold the shares as involved in the instant case on a single date but in fact as it appears from the assessment order, the Assessee sold 1212000 shares on 10 different dates in various quantities, starting from 02.05.14 to 11.07.2014 through recognized stock exchange/online platform.
14 ITA No.3179/M/2024Shri Keshavji Nongha Shah Admittedly, no allegations have been leveled and proved against the Assessee by any of the persons whose statements have been relied on by the AO. Further, in the SEBI report, there is no allegation against the Assessee. The AO has also not brought any cogent evidence on record to prove that transactions were not genuine and the Assessee is a beneficiary of the accommodation entry. Further, the evidences filed by the Assessee to prove the genuineness of the transactions, have not been taken into account by the AO. The AO has also not brought any cogent evidence on record to prove that transactions were not genuine and the Assessee is a beneficiary of the accommodation entry. The conclusion of the AO is that the Assessee had obtained accommodation entry solely based on assumption and presumption, on which courts have held, have no place in framing an assessment under the Income Tax Act. In our considered view the Assessee by producing the relevant documents established the identity, creditworthiness and genuineness of the transactions and therefore discharged the primary onus cast upon him.
8.1 Perusing the impugned order, we further observe that the Ld. Commissioner while deleting the addition under consideration has not only thoroughly examined the aforesaid facts and circumstances and material/statements relied on by the AO but also the applicability of decision in the case of Sumati Dayal vs. CIT (supra) as well as SEBI orders and various decisions of the Hon'ble Higher Courts and the fact that the AO has not allowed cross-examination of any of the witnesses nor provided any material to the Assessee on the basis of which the impugned addition was made. The Ld. Commissioner also taken into consideration the action of the SEBI, whereby the SEBI has revoked its previous order on the basis of which addition has been made. The Ld. Commissioner, on the aforesaid reasons, ultimately deleted the addition and therefore the 15 ITA No.3179/M/2024 Shri Keshavji Nongha Shah decision of the Ld. Commissioner in our considered view is logical and conscious and reasonable decision and thus needs no interference.
8.2 For completeness, we observe that the Hon'ble Jurisdictional High Court in the case of Pr. CIT-3 vs. Ziauddin A Siddique in Income Tax Appeal No.2012 of 2017 decided on 04.03.2022 has also dealt with the identical issue as involved in the instant case where the AO though considered the documents submitted by the Assessee in support of its claim qua sale and purchase of shares however, not criticized the same and there was no allegation against the Assessee that he has participated any price rigging on the scrips involved. For ready reference, the decision of the Hon'ble High Court is reproduced herein below:
"JUDGEMENT
1. The following question of law is proposed:
"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was Justified in deleting the addition of Rs.1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 19617"
2. We have considered the impugned order with the assistance of the 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 the 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 assessee that it has participated in any price rigging in the market on the shares of RFL 16 ITA No.3179/M/2024 Shri Keshavji Nongha Shah
3. Therefore, we find nothing perverse in the order of the Tribunal.
4. Mr. Walve placed reliance on a judgment 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.
6. The appeal is devoid of merits and it is dismissed with no order as to costs."
8.3 We further observe that the Hon'ble Apex Court in the case of Pr. CIT vs. Renu Agarwal (2023) 456 ITR 249(SC) has dismissed the SLP against the judgment of the Hon'ble Allahabad High Court passed in ITA No.44 of 2022 on 06.07.2022, wherein the Hon'ble High Court has also dealt with the identical issue as involved in the instant case and ultimately affirmed the deletion of identical addition allegedly made on penny stock by holding as under:
"Judgment Heard Sri Krishna Agarawal, learned counsel for the appellant.
This appeal under section 260A of the Income-tax Act, 1961 has been filed challenging the order dated January 17, 2022, passed by the Income- tax Appellate Tribunal, Lucknow Bench 'SMC' Lucknow in I. T. A No. 205 of 2020 (assessment year 2014-15).
The basic question involved in the present appeal is with regard to dele- tion of some amount which was added by the Assessing Officer on the allegation of penny stock.
The appeal of the respondent-assessee was allowed against the assess- ment order. The appeal filed by the assessee was allowed by the Com- missioner (Appeals) Against the appellate order the Revenue had filed the aforesaid income-tax appeal which has been dismissed by the Income-tax Appellate Tribunal.17 ITA No.3179/M/2024
Shri Keshavji Nongha Shah After detailed discussion, the Income-tax Appellate Tribunal has recorded the following findings of fact:
"The above findings recorded by the learned Commissioner (Appeals) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the learned Commissioner (Appeals) has specifically held that there is no adverse comment in the form of general and specific statement by the principal officer of the stock exchange or by the company whose shares were involved in these transactions and he held that the Assessing Officer only quoted the facts pertaining to various completely unrelated persons whose statements were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the Investigation Wing The learned Commissioner (Appeals) relying on various orders of the Lucknow Benches and other Benches has allowed relief to the asses- see by placing reliance on the evidence filed by the assessee before the Assessing Officer. I do not find any adversity in the order of the learned Commissioner (Appeals) specifically keeping in view the fact that the Lucknow Benches in a number of cases after relying on the judgment of the hon'ble Delhi High Court in the case of Krishna Devi had allowed relief to various assessees."
The concurrent findings of fact have been recorded by the first appellate authority and the Income-tax Appellate Tribunal Thus, no substantial question of law is involved in the present appeal. The matter is concluded by findings of fact.
For the reasons aforestated, we do not find any good reason to entertain this appeal. Consequently, it is dismissed."
8.4 We otherwise do not find any infirmity, impropriety and/or illegality in the decision of the Ld. Commissioner in deleting the addition under consideration and therefore on the aforesaid reasons, the impugned order does not require any interference. Thus, on the aforesaid analyzations and respectfully following the judgments of the Hon'ble High Court (supra) we are inclined to affirm the impugned order by dismissing the appeal of the Revenue Department.
18 ITA No.3179/M/2024Shri Keshavji Nongha Shah
9. Consequently, the appeal filed by the Revenue stands dismissed.
Order pronounced in the open court on 30.09.2024.
Sd/- Sd/-
(RATNESH NANDAN SAHAY) (NARENDER KUMAR CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.