Income Tax Appellate Tribunal - Nagpur
Rameshwarlal Mathuraprasad ... vs Asstt. Commissioner Of Income Tax, ... on 14 May, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
NAGPUR BENCH, NAGPUR
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND
SHRI K.M. ROY, ACCOUNTANT, MEMBER
ITA no.37/Nag./2025
(Assessment Year : 2015-16)
Rameshwarlal Mathuraprasad (HUF)
House no.607, Near Santra Market
................ Appellant
Empress Mill Road, Nagpur 440 018
PAN - AABHR7757J
v/s
Asstt. Commissioner of Income Tax
Circle-4, Nagpur
................ Respondent
Assessee by : Shri Kishore P. Dewani
Revenue by : Shri Abhay Y. Marathe
Date of Hearing - 02/04/2025 Date of Order - 14/05/2025
ORDER
PER K.M. ROY, A.M.
By this appeal, assessee has challenged the impugned order dated 06/01/2025, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2015-16.
2. Following grounds have been raised by the assessee:-
"1) The order passed by Commissioner of Income Tax (Appeals) National Faceless Appeal Centre dismissing the appeal and upholding the addition made under section 68 of I.T. Act 1961 in respect to sale proceeds of shares at Rs.1,50,73,436/- is unjustified, unwarranted and excessive.
2) The order passed by CIT(A) National Faceless Appeal Centre upholding the addition made by A.O. at Rs.7,53,672/- as unexplained expenditure under section 69C of I.T. Act 1961 is unjustified, unwarranted and excessive.
3) The addition made in the case of assessee under section 68 at Rs.1,50,73,436/- is unjustified, unwarranted and bad in law by not accepting 2 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 the sale value of shares of M/s GCM Securities (India) Pvt. Ltd. sold on stock exchange and received through proper banking channel.
4) The learned A.O. ought to have accepted the long term capital gain on sale of shares at Nil as shown considering provisions of section 10(38) of I.T. Act 1961.
5) The addition made by A.O. at Rs.1,50,73,436/- under section 68 is illegal, invalid and bad in law.
6) The addition made by A.O. at Rs.7,53,672/- under section 69C of I.T. Act 1961 is illegal, invalid and bad in law.
7) The learned A.O. erred in making addition at Rs.7,53,672/- under section 69C without there been any evidence of expenditure incurred by assessee on record.
8) The assessee denies liability to pay interest under section 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234B and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive.
9) Any other ground that shall be prayed at the time of hearing."
3. In the present case, the assessee, for the year under consideration filed original return of income under section 139(1) of the income Tax Act, 1961 ("the Act") on 21/10/2015, declaring total income of ` 18,94,810 and case was selected for scrutiny. Statutory notices under section 143(2)/142(1) of the Act were issued and duly served on assessee. The Assessing Officer noticed that the assessee had declared long term capital gains of ` 1,46,56,120 and claimed the same as being exempt under section 10(38) of Act. The assessee purchased 24,000 shares of M/s GCM Securities Ltd. for ` 4,80,000, in IPO (Initial Public Offer). The shares have been sold at stock exchange through Registered Stock Broker. The total sale proceeds amount to ` 1,50,73,436, and long term capital gain on the same amounts to ` 1,46,56,120 which is claimed exempt under section 10(38) of the Act. The Assessing Officer concluded assessment holding that the claim of the 3 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 assessee of exempt long term capital gain amounting to ` 1,46,56,120 cannot be allowed and the assessment order was passed making addition of ` 1,50,73,436 on account of unexplained cash credits under section 68 of the Act. The Assessing Officer also made addition of ` 7,53,672, as reasonable rate of 5% of amount as commission paid not shown in books of account by invoking provisions of section 69C of Act.
4. On appeal, the learned CIT(A), upheld the addition made by the Assessing Officer by referring to judgement of Hon'ble Supreme Court in Sumati Dayal reported as [1995] 214 ITR 801 (SC). The learned CIT(A) has noted that the circumstantial factors and human probabilities clearly indicates that the assessee indulged in taking accommodation entries through sale of shares. The learned CIT(A) upholding the assessment order passed byt eh Assessing Officer by dismissing the ground raised by the assessee. The learned CIT(A) in its impugned order, vide Para-5, noted that assessee might have incurred an expenditure of 5% for giving commission for various intermediaries and entry providers. It is with this noting, the ground of the assessee was dismissed.
5. In all the grounds, the disputed issue is income assessed under section 68 at ` 1,50,73,436, by not accepting exemption under section 10(38) of the Act in respect to sale proceeds of shares on Stock Exchange and inferred expenditure for payment of commission at ` 7,53,672 assessed under section 69C of the Act.
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Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025
6. The learned Counsel for assessee furnished gist of submissions which is as under:-
Ground No.1: Addition made by holding that sale proceeds of shares is unexplained credit to be assessed to tax at Rs.1,50,73,436/- under section 68 of I.T. Act 1961.
A) A.O. at Para- 1.2 Page- 2 has noted that sale proceeds of shares at Rs.1,50,73,436/-. Capital gain on sale of shares of GCM Securities Ltd. is Rs.1,45,93,436/-. It is concluded that entire amount of sale of shares is unexplained credit under section 68 of I.T. Act 1961 (Para- 26 Page- 68). A.O. has also made addition of Rs.7,53,672/- as estimated expenditure at 5% of above sum (Page- 69) B) The assessee has derived long term capital gain on sale of shares of M/s GCM Securities Ltd. Capital gain derived is Rs.1,45,93,436/- and same is not exigible to tax in terms of provisions of section 10(38) of I.T. Act 1961. In the course of assessment proceedings and in appellate proceedings following documentary evidence was placed on record for purchase and sale of shares:
i) Copy of Share allotment advice dated 04/04/2013 of Purva Shareregistry (India) Pvt. Ltd. (P- 2) and Share Application Form (P- 1) [Vol.- I].
ii) Demat account statement for the period 01/04/2013 to 31/03/2014 indicating incoming of shares of GCM Securities Ltd. (P- 3) [Vol.- I]
iii) Copy of contract notes in July 2014 and September 2014 (P- 4 to 8) [Vol.- I] issued by Anand Rathi Share & Stock Brokers Ltd. It evidences payment of STT, Service Tax, Brokerage and Stamp Duty.
iv) Ledger account of assessee in the books of Registered Stock Broker at Stock Exchange M/s Anand Rathi Share & Stock Brokers Ltd. Credit is given for sale of shares and payment is made through proper banking channel.
(P- 9) [Vol.- I]
v) Demat account statement for the period 01/04/2014 to 31/03/2015. It indicates sale of shares of GCM Securities Ltd. (P- 10) [Vol.- I] C) Documentary evidence placed on record for purchase and sale of shares has not been found to be incorrect or false in any manner. 5
Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 D) A.O. at para 3.1 to 4 at page 9 to 22 has discussed general market/modus operandi in capital market. No evidence/ material is discussed in relation to transaction of sale of shares of assessee. A.O. at para 5 page 22 to 52 has again made general discussion and referred to statement of persons located at Kolkata which are not in respect to transaction of sale by assessee. A.O. on the basis of mere general modus operandi has concluded that assessee has not explained claim of exemption under section 10(38) of I.T. Act 1961.
E) Evidence of purchase of shares and receipt of shares in the Demat account of assessee is undisputed fact on record. Shares of the company M/s GCM Securities Ltd. were acquired in the year 31/03/2014 and such investment was as per books of account and has been accepted in the assessment framed. Assessee is holding shares of various companies of an aggregate value of Rs.5.74 lacs. Investment in M/s GCM Securities Ltd. is Rs.4,80,000/- which is part of total investment held by assessee in different shares. Allotment received from Registrar of Initial Public Offer is accepted and has not invited any adverse observation.
F) Sale of shares made on Bombay Stock Exchange through Registered Stock Broker. Transaction of sale of share was made on screen based trading conducted at BSE through registered brokers. It was corroborated from contract notes indicating quantity, date, time and rate of sale. Transaction was through proper banking channel and recorded in books of account. Transaction of purchase and sale of share are reflected in Demat account. Contract notes indicate payment of security transaction tax in respect to transaction of sale of shares. Assessee has held shares for more than 12 months. Requisite conditions for grant of exemption under section 10(38) are fully satisfied.
G) Assessee submitted allotment letter of shares in IPO. The shares allotted were directly credited in the Demat account. Purchase of shares verifiable on perusing the Demat account. The share was directly allotted by company to assessee in view of Initial Public Offering (IPO).
H) A.O. has found no fault with legal documents. Share purchased by assessee are in the Initial Public Offer. The shares of company were actively traded in the market at stock exchange. Shares purchased by assessee is at fair market value.
I) It is undisputed fact on record that sale value of shares is on ruling rate at stock exchange on date of sale. It is also undisputed fact on record that shares sold are indicated as outgoing in Demat account. It is not alleged by A.O. that assessee continue to hold shares of GCM Securities Ltd. even 6 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 after having claimed to have sold such shares. On above factual situation addition made is arbitrary and unjustified. J) A.O. viewed the transaction adversely on account of report of Investigation Wing. A.O. has extensively dealt with the report even without providing the same to assessee. The report of Investigation Wing is a general report and is not with reference to any specific transactions of assessee. General report and observations of A.O. cannot impeach the genuineness of transactions more so when transaction of assessee is corroborated by legal evidence on record. K) The report of Investigation Wing has been prepared behind the back of assessee without giving reasonable opportunity of being heard to rebut the same. Use of report without confronting to assessee is in violation of principles of natural justice. L) Legal and cogent evidences fully substantiate the transaction in respect to purchase and sale of shares. Evidence on record leaves no doubt as to genuineness of transaction of sale of shares. Amount received by assessee in no manner of consideration can be considered to be unexplained credit. M) Assessee has sold the shares on stock exchange in screen based trading. When share sales through broker no seller is aware as to who is the purchaser. In assessment order A.O. has indicated only name and address of buyers but no value and quantity of share is mentioned (P- 15). It has not been confronted to assessee as to how and what basis it is so concluded to draw adverse inference.
N) A.O. has relied on statement of third party without providing opportunity to cross examination. Statement of third person without any corroborative evidence does not empower A.O. to make addition. At page 35 statement of Shri Anil Kedia recorded by DDIT Investigation Kolkata at the office premises of Excel Stock Brokering Pvt. Ltd. on 15/06/2015 has been pasted. Again at page 44 statement of Shri Pawan Kumar Kayan recorded during the course of search on his premises 30/03/2015 has been pasted. Both the statement has no nexus/co-relation with the transaction of assessee in respect to sale of shares. Hence, nothing adverse can be drawn from such statement. Statement which has not stood to the test of cross examination cannot be relied upon to make addition.
Reliance on :
i) (2015) 281 CTR 0241 (SC) Andaman Timber Industries v/s Commissioner of Central Excise. ii) (1976) 103 ITR 0437 ITO v/s Lakhmani Mewaldas 7 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025
O) A.O. at para 16 page 60 has specifically noted that cross examination of broker is humanly not possible and therefore there is no violation of principles of natural justice as assessee cannot establish that prejudice has been caused to assessee by the procedure followed. Observation of A.O. is contrary to law laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries reported at 281 CTR 241 (SC) and is unjustified. On facts and evidence on record addition made is clearly in violation of principles of natural justice and unsustainable.
P) Acquisition of share is not disputed. The share sold at the ruling market rate in open market at BSE is also undisputed fact on record. There is no case for A.O. to hold that long term capital gain arising on sale of shares is unexplained cash credit. A.O. has not brought any evidence on record to show that money in cash is flown from assessee for which cheque amount is received as sale of shares to assume that it is unexplained credit.
Q) Allotment of shares by company is as per provisions of Companies Act and are not in violation of SEBI guidelines. Sale of shares shown as receipt for computing income. It is not credit entry as envisaged under the provisions of section 68 of I.T. Act 1961. A.O. has not pointed out any credit entry which remains unexplained in order to invoke provisions of section 68 of I.T. Act 1961.
R) Assessee claimed exemption under section 10(38) of I.T. Act 1961 in respect to long term capital gain on sale of shares.
S) Reliance on: Bombay 1 (2012) 20 taxmann.com 529 (Bom.) CIT v/s Smt. Jamnadevi Agrawal 23/09/2010 (P- 1 - 4) (2, 3) 1-A SLP No.CC 12590/2011 filed by the Department dismissed 08/082011 (P- 5 - 6) 2 (2015) 54 taxmann.com 108 (Bom.) CIT v/s Shyam R. Pawar 10/12/2014 (P- 7 - 10) (9, 10) 3 Hon'ble High Court of Judicature at Bombay order in ITA No.2012 of 2017 in the case of Ziauddin A. Siddique 04/03/2022 (P- 11 - 13) (11, 12) 4 (2023) 156 taxmann.com 605 (Bom.) PCIT v/s Indravadan Jain (HUF) 12/07/2023 (P- 14 - 16) (16) 8 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 Orissa 5 (2024) 160 taxmann.com 567 (Orissa) PCIT v/s Kuntala Mohapatra 09/02/2023 (P- 17 - 19) 5-A (2024) 160 taxmann.com 608 (SC) PCIT v/s Kuntala Mohapatra 04/03/2024 (P- 20 - 21) Gujarat 6 (2020) 109 CCH 0411 (Guj.) PCIT v/s Parasben Kasturchand Kochar 17/09/2020 (P- 22- 23) 6-A (2021) 130 taxmann.com 177 (SC) PCIT v/s Parasben Kasturchand Kochar 02/08/2021 (P- 24 -26) 7 162 taxmann.com 892 (Guj.) PCIT v/s Shri Ambalal Chimanlal Patel 15/04/2024 (P- 27 - 30) Punjab & Haryana 8 Hon'ble High Court of Punjab & Haryana at Chandigarh order in ITA - 95-2017 (O&M) in the case of Prem Pal Gandhi 18/01/2018 (P- 31 - 34) Rajasthan 9 (2023) 453 ITR 513 (Raj. HC) PCIT v/s Shri Gaurav Bagaria 09/05/2022 (P- 35 - 36) 9-A Supreme Court order in SLP (Civil) Diary No.34137/2022 in case of Gaurav Bagaria 21/11/2022 (P- 37) 10 Hon'ble High Court of Judicature for Rajasthan Bench at
Jaipur order in D.B. ITA No.385/2011 in the case of Smt. Pooja Agarwal 11/09/2017 (P- 38 - 43) 11 (2023) 152 taxmann.com 181 (Raj.) PCIT v/s Ritu Agarwal Shreeram Bhawan 10/05/2022 (P- 44 - 46) Delhi 12 (2021) 126 taxmann.com 80 (Delhi) PCIT v/s Smt. Krishna Devi 15/01/2021 (P- 47 - 51) Allahabad 13 (2023) 153 taxman.com 578 (Allahabad) PCIT v/s Smt. Renu Agarwal 06/07/2022 (P- 52 - 53) 9 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 Madhya Pradesh 14 Hon'ble High Court of Madhya Pradesh at Indore in ITA No.39 of 2022 in the case of Shri Gopal Tayal 30/05/2024 (P- 54 - 55)
1) ITAT order in ITA No.1378/Mum/2024 in the case of Amit Sajjan Kumar Gupta 10/10/2024.
(P- 24)
2) ITAT order in ITA No.1120/Mum/2024
in the case of Seema Narendra Bapna
10/10/2024. (P- 25 - 66)
3) (2024) 167 taxmann.com 377 (Mum)
Amrita Abhishek Doshi v/s DCIT
27/08/2024 (P- 67 - 76)
4) ITAT order in ITA No.70/Mum/2024
in the case of Vikram N. Chandan
30/07/2024. (P- 77 - 93)
5) ITAT order in ITA No.4271/Mum/2023
in the case of Shaily Prince Goyal
30/05/2024. (P- 94 - 147)
6) ITAT order in ITA No.2944/Mum/2023
in the case of Abhishek Tejraj Doshi
20/03/2024. (P- 148 - 170)
7) ITAT order in ITA No.1837/Mum/2023
in the case of Alka Dilip Doshi
28/02/2024. (P- 171 - 184)
8) ITAT order in ITA No.3256/Mum/2022
in the case of Chirag Tejprakash Dangi
20/02/2024. (P- 185 - 195)
9) ITAT order in ITA No.3122/Mum/2022
in the case of Shri Abhishek Doshi
31/05/2023. (P- 196 - 202)
10) ITAT order in ITA No.3429/Mum/2019
in the case of Shri Vijayrattan Balkrishan
Mittal 01/10/2019. (P- 203 - 285)
1) ITAT order in ITA Nos.50/CTK/2020
in the case of Smt. Kuntala Mohapatra
Kuansh 21/10/2021. (P- 1 - 57)
2) ITAT order in ITA No.549/Ahd/2018
in the case of Parasben Kasturchand
Kochar 20/02/2020. (P- 58 - 61)
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Rameshwarlal Mathuraprasad (HUF)
ITA no.37/Nag./2025
3) ITAT order in ITA No.5182 & 5183/Mum/2011 in the case of Shri Ziauddin A Siddique 09/09/2016. (P- 62 - 74)
3) ITAT order in ITA No.1070/Del/2019 in the case of Krishna Devi 06/08/2019. (P- 75 - 90)
4) ITAT order in ITA No.550/JP/2019 in the case of Shri Gaurav Bagaria 10/07/2019. (P- 91 - 137)
6) ITAT order in ITA No.224/M/2024 in the case of Shri Mahaveer Kanwarlal Ranka 29/11/2024 (P- 138 - 146)
7) ITAT order in ITA No.316/RPR/2023 in the case of Mohammad Anish Hingora 21/11/2024 (P- 147 - 200)
8) ITAT order in ITA No.2923/Mum/2023 in the case of Manjula H. Vira 09/12/2024 (P- 201 - 213) Ground No.2: Addition made in respect to estimated unexplained expenditure under section 69C of I.T. Act 1961 at Rs.7,53,672/-.
A) A.O. has made addition not on the basis of any evidence on record as to commission paid. A.O. has merely inferred that assessee may have spent certain amount of commission on sale of shares of GCM Securities Ltd. Requisite conditions for invoking provisions of section 69C are absent.
B) Addition made by A.O. is on suspicion and surmises. The report of Investigation Wing is general in nature and is no legal evidence for inference of any expenditure can be assessed to tax under section 69C of I.T. Act 1961.
C) A.O. has not brought the name of any person to whom commission is paid. In absence of any evidence and even the name of person invoking provisions of section 69C is unjustified and unsustainable.
Reliance on :
i) ITAT Nagpur order in ITA No.204/Nag/2017 in the case of Shri Vinod B. Goenka vide order dated 28/06/2022.
7. The learned Counsel of assessee, by referring to gist of submission, has submitted that the Hon'ble High Courts of Bombay, Orissa, Gujarat, Punjab & Haryana, Rajasthan, Delhi, Allahabad and Madhya Pradesh have considered 11 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 the additions made under section 68 of the Act in respect to sale proceeds of shares sold on Stock Exchange and claim under section 10(38) of the Act. The judgments rendered by Hon'ble Bombay, Orissa, Gujarat and Rajasthan High Courts have achieved finality on dismissal of SLP by Hon'ble Supreme Court. Various judgements are placed on record to substantiate the submission made. It has been further contended that in view of binding precedents of Hon'ble Jurisdictional High Court, the view taken in the judgment of Hon'ble Kolkata High Court in Swati Bajaj cannot have any adversity. It has been submitted that this is more so in view of settled proposition of law that when two views are available the view faourable to subject needs to be adopted. In view of submission made, it was submitted that appeal of assessee be allowed by deleting the additions made in the assessment framed.
8. The learned Departmental Representative heavily placed reliance on the order passed by the authorities below. He submitted that the transactions are all colourable devices 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. The learned Departmental Representative furnished written submission with a prayer that the Tribunal is requested to consider the totality of circumstances as transactions are shown to be very complex and where meeting of mind cannot be established. Reliance has been placed on judicial precedents as discussed in the written gist of submission. The learned Departmental Representative has referred to modus operandi as indicated in the assessment order on the basis of 12 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 investigation made by the Department. It has also been noted that non- provision of cross-examination of person involved in accommodation entries is not material, as person whose statements are recorded, have only confirmed the modus operandi. It has been also noted that direct evidence is not necessary and test of preponderance of probability be applied in such cases. It is on this basis it has been submitted there is no merit in the appeal of assessee.
9. We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. We have perused the evidence on record and find that assessee was allotted 24,000 shares in Initial Public Offer at the price of ` 20 per equity share pursuance to application for shares made by assessee for 60,000 shares. The share application form and allotment letter issued by M/s Purva Shareregistry (India) Pvt. Ltd. is placed on record at Page-1 & 2 of the Paper Book. The assessee had made application for 60,000 shares and was allotted 24,000 shares. Demat account for the period from 01/04/2013 to 31/03/2014 is placed on record at Page-3 of the Paper Book. It indicates that on 03/04/2013, the assessee has received 24,000 shares in the initial public offering. In the aforesaid account, the assessee has also received share of M/s Power Grid, allotted in initial public offering at 1,029 shares. The shares held by assessee in M/s GCM Securities Ltd. have been sold through M/s Anand Rathi Share & Stock Brokers Ltd. during the period from July 2014 to September 2014. Contract note for sale of shares are placed on record at Page-4 to 8 of the Paper Book. It is evident from the contract note that 13 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 Security Transaction Tax has been paid by assessee at the time of sale apart from other charges collected by stock broker. Contract notes indicate the trade time as well as order number and date of sale of shares. Credit of sale amount in terms of contract note is given in the account of assessee in the ledger book of M/s Anand Rathi Share & Stock Brokers Ltd. and the same is placed on record at Page-9 of the Paper Book. Payment in respect to sale proceeds of shares is through proper banking channel and it is evident from ledger account of assessee in the accounts of stock broker. Demat account of the assessee for the period from 01/04/2014 to 31/03/2015 is placed on record at Page-10 of the Paper Book. Opening shares held in respect M/s GCM Securities Ltd. have been transferred at the time of sale in terms of contract note. Entire documentary evidence has been placed on record before lower authorities to substantiate the genuineness of transaction of purchase and sale of shares by assessee. The investment in shares is reflected in the balance sheet for the assessment year 2014-15. Facts as noted hereinabove are undisputed facts on record.
10. We further noticed that the Assessing Officer has primarily placed reliance on the report given by the Investigation Wing of the Income Tax Department, Kolkata to arrive at the conclusion that the long term capital gains reported by the assessee is bogus in nature. We further noticed that the Investigation Report prepared by investigation Wing, Kolkata is general in nature with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. Statements of persons recorded by Department at Kolkata are not in the assessment 14 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 proceedings of assessee and are general statements. We further noticed that the Assessing officer has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging prices. We also find that the assessee has purchased these shares by paying consideration through banking channels in IPO directly from listed company. Shares are kept in demat account; sale of shares is through stock exchange platform and received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the Assessing Officer himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. As noticed earlier, the Assessing Officer has not brought on record any material to show that the assessee was part of the group which involved in the manipulation of prices of shares. The Assessing Officer in the assessment order at Page-49 has noted that it is not the case of this office whether purchase of shares through preferential placement/ merger did actually took place or shares were sold on the exchange at the prevalent market rates after paying STT or not. The Assessing Officer has concluded on the basis of analysis, circumstantial evidences, human conduct and preponderance of probabilities is that what is apparent in this case is not real that these financial transactions were sham ones and that this entire edifice was only a colorable device used to evade tax. Statements referred to 15 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 in the assessment order are not in relation to transaction made by assessee for purchase and sale of shares and are general statements recorded by Investigation Wing of Kolkata. It does not refer to transaction of assessee. The Assessing Officer at Para-16 of the assessment order has noted that it is humanly not possible for the brokers to be present for oral cross examination. The learned CIT(A) has dismissed the appeal by noting that circumstantial factors and human probabilities clearly indicates that the assessee indulged in taking accommodation entries through sale of shares to uphold the action of the Assessing Officer and dismissal of appeal. No evidence, as placed on record, has been found to be incorrect or false in any manner. Written submission as submitted by the learned Departmental Representative again is making general observations without indicating any specific mistake in the legal documentary evidence placed on record. Written submission furnished by the learned Departmental Representative is generalized submission and it has not found any specific mistake in the transaction made for sale of shares by assessee by bringing any legal evidence on record. It does not indicate the legal evidence placed on record in any specific manner. It is undisputed fact on record that sale of shares is at the market rate on the date of sale of shares on stock exchange.
11. The Hon'ble Jurisdictional High Court in CIT v/s Smt. Jamnadevi Agrawal (supra) had considered the addition made by the Assessing Officer under section 68 of the Act in respect to sale of shares on the stock exchange. The Hon'ble Jurisdictional High Court has dismissed the appeal of Revenue by recording following findings.
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Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 "10. The sole contention raised by the Revenue in these appeals is that the entire long-term capital gains claimed by the assessee represent undisclosed income of the assessee because :
(a) most of the sales of the shares effected by the group are of the same companies and through the same brokers located at Calcutta,
(b) Pradeep Kumar Daga, the principal broker has confirmed that the transactions with the Haldiram group are sham and explained the modus operandi as follows :
"Party A wants to claim LTCG and approaches me through a person X. Mr. X approaches me with two names,i.e., the buyer (A) and the seller (B). Mr. A buys the share of the 29 company held by the seller B at Rs.3 through my terminal. After 365 days or one year when the share of the company has reached high of Rs. 100, Mr. X approaches me through Mr. A with the name fresh purchaser Mr. C, who is willing to buy the shares of Mr. A at Rs. 100. Mr. A (who was previously the purchaser and wants to avail of LTCG now) becomes the seller and sells his shares at Rs. 100 to Mr. C through my terminal. Mr. C gives me a cheque of Rs. 100 for the shares bought from Mr. A and subsequently I pay the sale proceeds in cheque/DD to Mr. A after deducting my brokerage. Subsequently, Mr. A on receipt of the sale proceeds by cheques/DD pays Mr. X, the same proceeds by cheques/ DD pays Mr. X the same amount by cash (No. 2 account), i.e., Rs. 100 and Mr. X pays the same to Mr. C. In this way, Mr. A converts the black money into white and avails of long-term capital gain."
(c)The sale transactions were off-market transactions and the Calcutta Stock Exchange by its letter dated May 26, 2005, has confirmed that quite a few of the transactions carried out by Shri Pradeep Kumar Daga were not borne on the records of the exchange and that the details noted on some of the other contract notes did not match.
(d)There were unexplained cash credits in some of the buyer's bank accounts prior to issuance of cheques to the assessees.
11. We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim.
12. From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is 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 assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions.
17
Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025
13. The statement of Pradeep Kumar Daga that the transactions with the Haldiram group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On a perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought to our notice that the findings recorded by the Tribunal are contrary to the documentary evidence on record.
14. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal.
15. Reliance placed by the counsel for the Revenue on the decision of the Supreme court in the case of Sumati Dayal [1995] 214 ITR 801 is wholly misplaced. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts.
16. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on findings of fact. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs."
12. SLP filed by the Revenue in respect to aforesaid judgement has been dismissed by Hon'ble Supreme Court vide judgement dated 08/08/2011. Ratio laid down by the judgement of Hon'ble Jurisdictional High Court squarely applies to facts in the case of assessee. The Hon'ble Jurisdictional High Court has duly noted and considered the judgement of Hon'ble Supreme Court in the case of Sumati Dayal as can be seen from the extract referred to hereinabove. At Para-10 of the judgement, it is noted that principal broker has confirmed the transaction as sham and explained modus operation as reproduced therein. At Para-13 such statement was concluded to be wrong 18 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 on producing documentary evidence that shares sold were in consonance with market value. In the case of assessee it is undisputed fact that documentary evidence is placed on record that shares sold are at market value. Legal documents clearly demonstrate genuineness of purchase and sale transactions. It is undisputed fact on record that shares have been sold at the prevalent rate on the stock exchange in the market. Sale of shares in stock exchange is on screen based trading and it is not possible for seller to identify the buyer of shares. Entire transaction of sale of shares is with Registered Stock Brokers. Seller is never connected with buyer and in fact details of buyer are never to the knowledge of seller of shares. Sale consideration has flown from the registered stock broker bank account through proper banking channel. It is settled proposition of law that apparent is real. This is in terms of law laid down by the Hon'ble Supreme Court in Daulat Ram Rawatmull, 87 ITR 349. No shred of evidence on record indicates that assessee had any connect with buyer of shares to allege case for accommodation entry. Respectfully following the judgement of the Hon'ble Jurisdictional High Court, we are of the considered opinion that the addition made by the Assessing Officer and upheld by the learned CIT(A) is unjustified.
13. We may refer to the decision 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 19 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 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 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 perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While t is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company 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 20 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 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 DMAT 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. 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 that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either.
7. As a result of the above discussion, we do not find any substance in the contention of Mr. Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.
8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law."
Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified.
14. We may refer to the decision rendered by the Hon'ble Jurisdictional High Court in PCIT v/s Ziauddin A Siddique, in Income Tax Appeal No.2012 21 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 of 2017, vide order dated 04/03/2022 and relevant discussion made by the Hon'ble Bombay High Court are extracted below:-
"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.
3. Therefore we find nothing perverse in the order of the Tribunal.
4. Mr. Walve placed reliance on a judgment of the Supreme Court in Principal Commissioner of Income-tax (Central)-1 v/s NRA Iron & Steel (P.) Ltd.1 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."
Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified.
15. We may refer to the decision rendered by the Hon'ble Jurisdictional High Court in PCIT v/s Indravadan Jain (HUF), Income Tax Appeal No.454 of 2018, order dated 12/07/2023, 156 taxmann.com 605 (Bom.) and relevant discussion made by the Hon'ble Bombay High Court are extracted below:-
"4. The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who 22 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange 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.
5. We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises."
16. 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., are not found to be incorrect. Ratio laid down supports the assessee's case and the addition made in assessee's case is held to be unjustified.
17. The Hon'ble Orissa High Court in PCIT v/s Kuntala Mohapatra, 466 ITR 47 (Ori.) has considered the addition made by the Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the Hon'ble Orissa High Court judgement is reproduced hereunder for ready reference.
23
Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 "2. The question sought to be urged by the Revenue Department in the present appeal is as follows:
"Whether after making certain statements in the survey the Assessee not claiming exemption under Section 10(38) of the Income Tax Act, 1961 at the stage of the assessment proceedings, could be the Assessee turned around and make such claim of wanting to cross- examine persons make adverse statements against the Assessee at the stage of the appeal before the ITAT"?
3. The impugned order of the ITAT has sufficiently dealt with the factual details concerning the Respondent-Assessee. The question was regarding the claim of long-term capital gains on shares in terms of Section 10(38) of the Act. During the course of scrutiny assessment, a revised return was filed by the Assessee claiming the above exemption. After the AO rejected the plea, the Assessee went before the CIT(A). The CIT(A) was satisfied that the purchase of liquid shares have been made through Account Payee Cheques and the shares themselves were held in Demat Account for more than 12 months and then sold through the recognized stock exchange after payment of security transaction tax. A reference was made to the CBDT circular which debarred the Revenue from obtaining admissions/ statements during the course of a survey. The ITAT also noted the settled position in law that if an Assessee has wrongly offered an item of income or omitted to make a claim of deduction in the return, he was entitled to correct such a mistake by making a request to the AO to that effect.
4. Another ground on which the ITAT found fault with the additions made by the AO was that reliance was placed on statement of 'so called entry operator' to justify the additions under Sections 68 and 69 of the IT Act. These statements were recorded on various dates in some other proceedings not connected with the Assessee. Further, the statements were recorded much before the date of the survey conducted on the Assessee. It was unable to be disputed by the Department that the Assessee did not have an opportunity to challenge such statements and further, no opportunity to cross-examine the so-called entry providers was given to the Assessee.
5. Having heard learned Senior Standing Counsel for the Department (Appellant) and having perused the impugned orders of the AO, CIT(A) and the ITAT, the Court finds that both the grounds viz., the claim for benefit of Section 10(38) of the Act and denial of an opportunity to cross examine the entry providers, turned on facts. The ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO.
6. In the considered view of the Court, the ITAT committed no error in concurring with the view of the CIT(A) and in dismissing the Revenue's appeal. No substantial question of law arises from the impugned order of the ITAT that calls for interference by this Court. The appeal is accordingly dismissed." 24
Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 SLP filed by the Revenue has been dismissed by Hon'ble Supreme Court vide judgment dated 04/03/2024 and is reported at 466 ITR 50(SC). Relevant extract of the judgement is reproduced hereunder:-
"1. Delay condoned.
2. Heard the learned Additional Solicitor General.
3. We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.
4. Pending application(s), if any, shall stand disposed of."
Ratio laid down supports the assessee's case and the addition made in assessee's case is held to be unjustified.
18. The Hon'ble Gujarat High Court in PCIT v/s Parasben Kasturchand Kochar, CCH 411 (Guj.) has considered the addition made by the Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the judgement of the Hon'ble Gujarat High Court is reproduced hereunder for ready reference:-
"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:-
"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. V/s 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 25 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 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." SLP filed by the Revenue has been dismissed by the Hon'ble Supreme Court, vide judgment dated 02/08/2021, and is reported at 282 Taxman 301(SC). Relevant extract of the judgement is reproduced hereunder:-
"1. We are not inclined to interfere with the impugned order. The Special Leave Petition is, accordingly, dismissed.
2. Pending application, if any, stands disposed of."
Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified.
19. The Hon'ble Punjab & Haryana High Court in PCIT v/s Prem Pal Gandhi, Income Tax Appeal no.95 of 2017, vide judgement dated 18/01/2018, has considered the addition made by the Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant 26 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 extract from the judgement of the Hon'ble Punjab & Haryana High Court is reproduced hereunder for ready reference:-
"4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 at ` 11/- and sold the same in the assessment year 2008-2009 at ` 400/- per share. In the above case, namely, ITA-18-2017 also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees' income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner.
5. In these circumstances, following the judgement in ITA-18-2017, it must be held that there is no substantial question of law in the present appeal."
Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified.
20. The Hon'ble Rajasthan High Court in PCIT v/s Shri Gaurav Bagaria reported at 453 ITR 513 (Raj.) has considered the addition made by the Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the judgement of the Hon'ble Rajasthan High Court is reproduced hereunder for ready reference:-
"3. xxxxxxxx On perusal of findings arrived at by the learned ITAT, reproduce as under:-
"The same facts were considered in the above cited cases regarding purchase of shares of M/s. Careful Projects Advisory Ltd which was subsequently merged with M/s. Kailash Auto Finance Ltd. and after analyzing the relevant documentary evidence which includes purchase bill, payment consideration through bank, dematerialization of shares, allotment of the shares amalgamated new entity in lieu of earlier company, the Tribunal has held that in the absence of any contrary evidence it cannot be held that the assessee 27 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 has introduced his own unaccounted money by way of bogus Long Term Capital Gain. The Tribunal has also followed the decision of Hon'ble Jurisdictional High Court in case of CIT v/s Smt. Pooja Agarwal (supra) wherein the Hon'ble High Court has also upheld the finding of the ld. CIT (A) and this Tribunal when the assessee produced all the relevant details and evidence in support of the transaction of purchase and sale of shares. Accordingly, in view of the facts and circumstances as discussed above, when the assessee has produced all the relevant documentary evidences to establish the genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee then treating the transaction of purchase and sale as sham by the AO is not justified. The assessee has also produced the financial statements of M/s. Kailash Auto Finance Ltd. to show that the company has earned a handsome profit. Further, the alleged SEBI order was also subsequently revoked. Therefore, all these facts established the genuineness of the transaction. Hence we do not find any error or illegality in the order of the ld. CIT (A) in deleting the addition made by the AO under section 68 of the IT Act by treating the Long Term Capital Gain on sale of shares as unexplained cash credit. The addition of Rs. 1,51,869/- being the deemed commission for taking the accommodation entry, is consequential to the main issue. Hence, the same is also not sustainable."
4. We are of the view that the present appeal does not involve any substantial question of law. Learned ITAT has specifically held that the assessee has produced all the relevant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. Further, learned ITAT has also relied upon the decision of the jurisdictional High Court reported in 2018 (99) taxmann.com 451 (Raj.) titled as Commissioner of Income Tax, Jaipur V/s Smt. Pooja Agarwal, wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue.
5. In the light of above facts, this Court is of the view that the order of learned ITAT requires no interference and therefore, the appeal is dismissed." SLP filed by the Revenue has been dismissed by the Hon'ble Supreme Court in SLP (Civil) No.34137/2022, vide judgment dated 21/11/2022. Relevant extract of the judgement is reproduced hereunder:-
"Delay condoned.
The special leave petition is dismissed."
Ratio laid down supports the assessee's case and the addition made in assessee's case is held to be unjustified.
28
Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025
21. The Hon'ble Allahabad High Court in PCIT v/s Smt. Renu Agarwal reported at 153 taxmann.com 578 (All.) has considered the addition made by the Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the judgement of the Hon'ble Allahabad High Court is reproduced hereunder for ready reference:-
"5. After detailed discussion, the ITAT has recorded the following findings of fact :
"The above findings recorded by ld. CIT(A) 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 ld. CIT(A) has specifically held that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange or by the company whose shares were involved in these transactions and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement 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 ld. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidences filed by the assessee before Assessing Officer. I do not find any adversity in the order of ld. CIT(A) specifically keeping in view the fact that Lucknow Benches in a number of cases after relying on the judgment of Hon'ble Delhi High Court in the case of Krishna Devi and others had allowed relief to various assessees."
xxxxxx
7. For the reasons aforestated, we do not find any good reason to entertain this appeal. Consequently, it is dismissed." Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified.
22. The Hon'ble Madhya Pradesh High Court in PCIT v/s Shri Gopal Tayal, in Income Tax Appeal No.39 of 2022, vide order dated 30/05/2024, has 29 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 considered the addition made by Assessing Officer under section 68 of the Act and claim of exemption under section 10(38) of the Act. The relevant extract from the judgement of the Hon'ble Madhya Pradesh High Court is reproduced hereunder for ready reference:-
"This appeal is filed by the appellant under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') being aggrieved by the order dated 27.07.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore in ITA No.246/Ind/2019 for the Assessment Year 2014-15 proposing following substantial question of laws in this appeal:-
1] Whether on facts and circumstances of the case, the ITAT was justified in law in deleting the addition of Rs.17,78,822/- made by AO, which was confirmed by CIT (A), ignoring the findings of Investigation Wing that M/s Life Line Drugs & Pharma Ltd. was clearly established as a bogus penny stock script company which was used for claiming bogus Long Term Capital Gain as exempt Under section 10 (38) of the Income Tax Act, 1961 ?
2] Without prejudice to the above, on facts and within the legal spectrum of the case, the ITAT was justified in not appreciating the spirit and substance of the rest of human probabilities by ignoring the judgment of Sumati Dayal V/s CIT (1995) 80 Taxman 89 (SC) where astronomical increase in price of share and that too without any substantial business activity or profit earning apparatus ?
02. This issue came up for consideration in bunch of appeals, main case is ITA No.56 of 2021 and this Court has dismissed the appeals filed by the revenue vide common order dated 30.04.2024.
03. In view of the aforesaid, the present appeal is dismissed and the order dated 30.04.2024 passed in ITA No.56 of 2021 shall be applicable mutatis mutandis in the facts and circumstances of the present case also."
Ratio laid down supports the assessee's case and the addition made in assessee's case is held to be unjustified.
23. The Hon'ble Delhi High Court in PCIT v/s Smt. Krishna Devi reported at 431 ITR 361 (Del.) has noticed that the reasoning given by the Assessing Officer to disbelieve the capital gains declared by the assessee, viz., astronomical increase in the price of shares, weak fundamentals of the 30 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 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. The relevant part of the judgement is extracted as under:-
"11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade 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 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 that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted 31 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.
12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the 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. 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 case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (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 (supra) too turns 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 authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order.
14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration."
Ratio laid down supports the assessee's case and the addition made in the assessee's case is held to be unjustified.
24. Reliance is placed on the judgement of Hon'ble Jurisdictional High Court in the case of Seimens India Ltd. & Anr., reported as (1983) 43 ITR 120. This judgement has been noted with approval by the Hon'ble Supreme Court in 32 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 ITO v/s Stumpp Schuele & Somappa Pvt. Ltd., reported as 187 ITR 108 (SC). The Hon'ble Supreme Court has explained the binding precedents in respect to judgements of Courts. The Hon'ble Court at Para-25 has held as under:-
"So far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court as also by a decision of the High Court of the State within whose jurisdiction he is, irrespective of the pendency of any appeal or special leave application against that judgement. He would equally be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee. Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is, but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the Tribunal has decided a point on favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee."
Ratio laid down by the aforesaid decision squarely supports and applies to the facts in assessee's case. The submission of assessee is supported by the view taken by various Hon'ble High Courts including Jurisdictional High Court, as noted hereinabove, as well as various Benches of the Tribunal across the country in terms of which the addition, as made in assessee's case is unjustified.
25. Accordingly, in view of the facts and circumstances of the case, we are of the considered opinion that the decisions rendered by the jurisdictional Hon'ble Bombay High Court and various Hon'ble High Courts in the cases cited above shall apply to the present case, since the Assessing Officer has not established that the assessee was involved in price rigging and further the Assessing Officer did not find fault with any of the documents furnished by the assessee.
33
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26. We also noticed earlier that the Assessing Officer has assessed the sale consideration of shares as unexplained cash credit under section 68 of the Act. It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the Revenue. The sale of shares has taken place in the online platform of the Stock Exchange and the sale consideration has been received through the stock broker in banking channels. It is not alleged that shares sold are available with the assessee and are not sold as claimed. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of section 68 of the Act.
27. The learned Departmental Representative has referred to judicial precedent in Suman Poddar which has been referred to as that of the Hon'ble Kolkata High Court. The aforesaid decision in fact is rendered by the Hon'ble Delhi High Court and is reported as 423 ITR 480 (Del). The aforesaid decision of Suman Poddar has been considered by the Hon'ble Delhi High Court itself in Krishnadevi reported as 431 ITR 361 (Del.), vide Para-12 of its judgement and the same is reproduced hereinabove at Para-23. The Hon'ble Delhi High Court itself has noted that aforesaid decision was on account of lack of evidence produced by the assessee therein to show the actual sale of shares in that case. In view of above, nothing adverse remain in respect to such decision relied upon by learned Departmental Representative.
28. The Hon'ble Gujarat High Court in PCIT v/s Divyaben Prafulchandra Parmar, Income Tax Appeal No.812 of 2023, vide order dated 02/01/2024, has dismissed the appeal of the Revenue. The Hon'ble High Court at Para-11 34 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 of the judgement has reproduced the order of the ITAT wherein reliance on judgement of Swati Bajaj of the Hon'ble Calcutta High Court is considered. Relevant extract of judgement is reproduced hereunder:-
"[11] The Tribunal also distinguished the judgement relied upon on behalf of the Revenue in the case of Swati Bajaj (supra) in following paragraphs:
"33. We note that Ld DR for the Revenue heavily relied on the Judgement of Hon'ble Calcutta High Court in the case of Swati Bajaj and other (supra), however, we are of the view that as per the judgement of Hon'ble High Court of Bombay in the case of Thanna Electricity Supply Ltd (1994) 206 (ITR) 727 (Bom) wherein it was held that decision of a High Court will have the force of binding precedent only in the State or territories in which the Court has jurisdiction. Hence we note that judgment of Hon'ble Calcutta High Court in the case of Swati Bajaj and others (supra) should not be applicable to the assessee as it is outside territorial jurisdiction of Gujarat. However, the Judgment of Hon'ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai and Nishant Kantilal Patel (supra) should be applicable in the assesse's case as there are the judgment of Jurisdictional High Court. Besides, the Jurisdictional Co-ordinate Bench of ITAT Ahmedabad in the save of M/s. Ice Worth Reality LLP. Vide ITA Nos. 565 & 566/Ahd/2020, for Assessment Year 2012-13 & 2015-16, order dates 13.03.2023 (supra), deleted the addition made by the Assessing Officer in respect of Sunrise Asian Ltd. ("SAL") shares, which is impugned shared before us. We note that Assessing Officer has not been able to point out any evidence whatsoever to alleged that money changed hands between the assessee and the broker or any other person, or father that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged.
34. We note that addition under section 18 of the Act made merely on the basis of suspicion presumptions and probability of preponderance without any direct evidence to prove the transactions as non-genuine or sham or demonstrating assessee's involvement in any kind of manipulation, cannot be made. Thus, the assessee has explained and submitted evidences to prove identity, nature of source of the cash credit on account of sale proceeds credited received in the bank account of the assessee and also furnished all evidences comprising contract notes, broker, banking details in support of the genuineness of the transactions. The shares are sold by the assessee's broker on BSE platform hence source in BSE's clearing system. The transactions on the BSE platform and settlement system who are responsible for the transactions of the demat account and prevailing price on public domain prove the genuineness of the transactions. Therefore, respectfully, following the judgment of Hon'ble Jurisdictional High Court (supra) and Coordinate Bench of ITAT (supra), we deleted the addition Rs. 49,01,840/-.
35. Since we have deleted the mam addition of Rs 49,01,840/-, therefore Ground No 2 raised by the assessee for addition under section. 69C for Rs. 98,038/-, w.r.t. notional commission expenses 2% of LTCG being unexplained expenditure, is consequential in nature and hence deleted."
xxx xxx xxx [16] Considering the contentions raised on behalf of the Revenue,the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the 35 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non-genuine transaction by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under:
"5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The 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."
29. The decisions of the Hon'ble Jurisdictional High Court on the subject matter are binding precedents in view of settled position of law. Reliance on the decision of Swati Bajaj of Hon'ble High Court of Calcutta by the learned Departmental Representative was on facts as in the said case and said decision is distinguishable considering facts in assessee's case. It is contrary to the judgements rendered by the Hon'ble Jurisdictional High Court. It is 36 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 equally settled position of law that on two possible views a view favourable to assessee needs to be adopted. Thus, nothing adverse remains from the judgement of Swati Bajaj of Hon'ble Calcutta High Court.
30. The learned Departmental Representative has referred to decision of Hon'ble Supreme Court in M/s NRA Iron and Steel Pvt. Ltd. v/s CIT. The aforesaid decision has been noted by the Hon'ble Jurisdictional High Court while considering the issue of addition under section 68 and exemption under section 10(38) of the Act in PCIT v/s Ziauddin A. Siddique, in its judgement dated 04/03/2022. Extract of the aforesaid judgment is reproduced in this order at Para-14. At Para-4 of the judgement, it has been noted that reliance on the aforesaid judgement does not help the Revenue inasmuch as the facts in that case were entirely different. In the light of above factual position, there remains no adversity from the said judgement relied upon by the learned Departmental Representative. The learned Departmental Representative has also referred to the decision of Hon'ble Supreme Court in CIT v/s Sumati Dayal reported as 214 ITR 801 (SC). The aforesaid decision has also been considered by the Hon'ble Jurisdictional High Court in CIT v/s Smt. Jamnadevi Agrawal, reported as 328 ITR 656 (Bom.) while considering provisions of section 68 on sale of shares. The extract of aforesaid judgement has been reproduced in this order at Para-11. In the judgement at Para-15, the Hon'ble Jurisdictional High Court has concluded that decision relied upon by the counsel is distinguishable on facts. In view of above factual position, there remains no adversity in respect to such judgement relied upon by learned Departmental Representative.
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31. The entire case of the Assessing Officer is based on the preponderance of probabilities and the normal human conduct to allege that the transaction undertaken by the assessee was not genuine. It is a settled position in law that the onus of proving that the apparent is not real is on the person who alleges it to be so. It is not open to the Revenue to simply allege that the apparent is not real in a given case, as the one at hand, without bringing on record any tangible material to establish the same. Reference, in this regard may be made to the judgment of the Hon'ble Supreme Court in CIT v/s Daulat Ram Rawatmull: 87 ITR 349 (SC), wherein the Hon'ble Supreme Court held that if FD in the names of sons of partners are utilized as security by the Firm, then, the onus of proving that Firm was owner of the FD was on the Revenue. In Jaydayal Poddar v/s Bibi Hazra: AIR 1974 SC 171, Supreme Court held that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner is on the person asserting it to be so. It has similarly been held in the case of CIT v/s Bedi & Co. (P) Ltd: 230 ITR 580 (SC). The principle of law thus is that the Assessing Officer cannot treat a transaction as bogus only on the basis of suspicion or surmise. The Assessing Officer has to bring tangible material on record to support his finding that there has been collusion or 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. In the facts in the case of assessee Assessing Officer and the learned CIT(A) had not placed on record any independent tangible material or evidence to both 38 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 establish that assessee had undisclosed income and further that the share transaction undertaken were bogus. Reference can be made to the judgement of Hon'ble Supreme Court in the case of McDowell & Co. Ltd. reported at 154 ITR 148 (SC). It has been held that the act of questioning the very basis of a transaction and branding it as illegitimate or a camouflage has to be based on substantial, concrete and cogent evidence, wherein the proof of wrong-doing has to be clear and succinct. In this connection, reference may be made to the observations of the Hon'ble Supreme Court in the case of Union of India v/s Azadi bachao Andolan, [(2003) 132 Taxmann 373 (SC)], wherein while referring to their judgement in the case of McDowell & Co (supra), the Supreme Court had made the following pertinent topical observations:-
"We are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some under laying motive supposedly resulting in some economic determent or prejudice to the national interest, as perceived by the respondents."
32. On the facts and evidence on record, it is evident that no opportunity of cross-examination has been provided to the assessee in respect to statement of persons referred to in the assessment order to draw adverse inference. On the contrary, at Para-16 of assessment order, it has been noted that no opportunity to cross-examination to broker is humanly possible. Reliance on the statement which has not stood to the cross-examination is violation of principles of natural justice and contrary to law laid down by the Hon'ble Supreme Court in Andaman Timber Industries, reported as 127 DTR 241 (SC). The addition made by the Assessing Officer being contrary to law laid down by the Hon'ble Supreme Court is held to be unjustified. 39
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33. Considering the totality of facts and on examination of evidence on record, we hold that the assessee has explained the transaction of purchase and sale of shares satisfactorily. Transaction of sale of shares is hereby held to be genuine and bona fide considering the legal evidence available on record. Legal position on the subject discussed hereinabove fully supports the assessee's case as to the addition made by the Assessing Officer is unjustified and unsustainable. In view of the foregoing discussions, we hold that he sale consideration received on sale of shares cannot be assessed as unexplained cash credit under section 68 of the Act. Long term capital gains declared in the return of income and exemption claimed hereby accepted as shown in return of income. Accordingly, we direct to delete the impugned addition made at ` 1,50,73,436. Hence, the grounds raised by the assessee are allowed.
34. In assessee's case in the assessment order at Para-27, it has been noted that reasonable rate of 5% of the amount as commission paid not shown in the books of the assessee to bring back unaccounted money in his books as bogus long term capital gain is being calculated as unexplained expenditure under section 69C of the Act at ` 7,53,672, being 5% of the amount of addition made under section 68 of the Act at ` 1,50,73,436. The aforesaid addition has been upheld by learned CIT(A) by noting at Para-5 that the assessee might have incurred an expenditure for giving commission to various intermediaries and entry providers. With these observations, appeal of the assessee has been dismissed by the learned CIT(A). The 40 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 submission made by learned Counsel for the assessee is reproduced at Para-
6. It is evident from the assessment order as well as from the appellate order that there is no evidence on record to indicate that the assessee has incurred any expenditure on account of alleged commission for which the addition has been made at the hands of the assessee. Basis of addition is solely as Assessing Officer and the learned CIT(A) have not accepted the sale transaction in respect to sale of shares of M/s GCM Securities Ltd. We have already held hereinabove that sale transaction in respect of shares is genuine and bona fide as per documentary evidence on record. In view of the above, there remains no case for any alleged commission which calls for any addition at the hands of assessee. The very premise for which the addition is made has been held to be incorrect and thus consequent addition made by the Assessing Officer for alleged expenditure is unjustified and unsustainable. It is seen that the Assessing Officer has made adverse inference which is not based on any material or evidence on record. The Assessing Officer has not even stated as to whom the aforesaid money is paid so as to constitute the expenditure incurred which may require explanation by the assessee. It is settled position of law that onus is on the Assessing Officer to show first that the expenditure is incurred and question of same required to be explained by assessee arises thereafter. In the first place there being no evidence of expenditure incurred by the assessee, the question of any addition for the same does not survive. The addition made by the Assessing Officer is unjustified and unsustainable. We, therefore, hold that there is no case for making any addition under section 69C of the Act at the hands of the 41 Rameshwarlal Mathuraprasad (HUF) ITA no.37/Nag./2025 assessee. The addition made by the Assessing Officer and upheld by learned CIT(A) at ` 7,53,672 is directed to be deleted. Thus, the grounds challenging the addition of ` 7,53,672, of the assessee is allowed.
35. In the result, appeal by the assessee stands allowed.
Order pronounced in the open Court on 14/05/2025
Sd/- Sd/-
V. DURGA RAO K.M. ROY
JUDICIAL MEMBER ACCOUNTANT MEMBER
NAGPUR, DATED: 14/05/2025
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The PCIT / CIT (Judicial);
(4) The DR, ITAT, Nagpur; and
(5) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
Sr. Private Secretary
ITAT, Nagpur