Income Tax Appellate Tribunal - Delhi
Harish Chaurasia,Delhi vs Deputy Commissioner Of Income Tax, ... on 25 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B': NEW DELHI
BEFORE SHRI SUDHIR KUMAR, JUDICIAL MEMBER
AND
SHRI MANISH AGARWAL, ACCOUNTANT MEMBER
ITA No.3033/Del/2025
(ASSESSMENT YEAR 2013-14)
Sh. Harish Chaurasia, Deputy Commissioner of
575, First Floor, Double Storey Income Tax,
Flats, New Rajinder Nagar, Vs. Central Circle-15,
Delhi-110060. New Delhi.
PAN-ADAPC4197P
(Appellant) (Respondent)
Assessee by Shri Ashwani Kumar, CA and
Shri Ankur Aggarwal, CA
Department by Ms. Pooja Swaroop, CIT-DR
Date of Hearing 09.02.2026
Date of Pronouncement 25.03.2026
ORDER
PER MANISH AGARWAL, AM:
The present appeal is filed by the Assessee against the order passed by Ld. Commissioner of Income Tax (Appeals) 26, New Delhi ['Ld. CIT(A)' in short], in Appeal No. 26/10141/2012-13 dated 06.03.2025 passed u/s 250 of the Income Tax Act, 1961 ('the Act' in short) arising out of the assessment order passed u/s 147 read with section 143(3) of the Income Tax Act, 1961 dated 26.05.2023 for Assessment Year 2013-14.
2. Brief facts of the case are that original return of income was filed on 29.09.2023 declaring total income at Rs. 24,56,710/-. Based on the information received from Investigation Wing, Noida that assessee has received long term capital gain of Rs. 13,47,01,513/- from the sale of shares of PMC Fincorp Ltd. (PMC) which 2 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT is a penny stock company and the assesse is held as beneficiary traded in the share of PMC and generate bogus Long term capital Gains (LTCG). Accordingly, notice u/s 148 of the Act was issued on 23.04.2021 after obtaining approval for competent authority. Subsequent to the decision of Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal reported in 445 ITR 05, the said notice was treated as notice u/s 148A(b) and after considering the submissions made by the assessee, order u/s 148A(d) of the Act was passed on 20.07.2022 after taking approval from the competent authority. Thereafter, fresh notice u/s 148 was issued on 21.07.2022. In response the assessee filed return of income on 17.08.2022 declaring total income of Rs. 24,56,710/-. A notice u/s 143(2) was issued on 18.01.2023 and, thereafter, various notices were issued along with questionnaire u/s 142(1) from time to time which were duly replied by the assessee. The AO after considering the submissions made and based on the information received from the Investigation Wing, alleged that assessee has obtained fictitious income in the shape of long term capital gain of Rs.13,47,01,513/- which was treated as unexplained income u/s 69 of the Act and addition was made. Further addition of Rs. 26,94,030/- was made by holding 2% commission paid for obtaining bogus long term capital gain as unexplained expenditure u/s 69C of the Act. Accordingly, the total income of the assessee was assessed at Rs.13,98,52,253/-.
3. Against the said order, assessee filed appeal before the Ld. CIT(A) who vide impugned order dated 06.03.2025 has confirmed the additions and by dismissed the appeal of the assessee wherein the addition made u/s 69A of the Act on account of alleged bogus accommodation entry long term capital gain was treated as unexplained credit u/s 68 of the Act.
3 ITA No.3033/Del/20254. Aggrieved by the said order assessee is in appeal before the Tribunal by taking following grounds of appeal:
"1. That order dated 06.03.2025 passed u/s 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income-Tax (Appen's)-26, Delhi is against law and facts on the file in as much as he was not justified to arbitrarily uphold the action of the Learned Assessing Officer in making an addition of Rs. 13,47,01,513/-to the returned Income by:
(i) treating the sale proceeds of shares as, alleged, unexplained investment u/s 69A by ignoring the fact of non-applicability of the said section to the impugned transaction)
(ii) ignoring the detailed submissions made and plethora of documentary evidences filed without pointing out any defect in the same or furnishing any cogent reasoning to rebut the arguments advanced.
(i) denying the claim of long-term capital gains and treating the same as bogus on the basis of mere suspicions, surmises and conjectures without bringing on record any definite evidence to support his stand that the Appellant had, allegedly, routed his undisclosed income in the books in the garb of bogus long-
term capital gains and without rebutting the facts, material and findings on record:
(iv) by not appreciating the fact that the statement of Sh. Raj Kumar Modi on which the entire case of the Department is based was subsequently retracted by him
2. That order dated 06.03.2025 passed u/s 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-26, Delhi is against law and fact on the file in as much as he was not justified to arbitrarily uphold the action of the Learned Assessing Officer in making an addition of Rs. 26,94,030/- as, alleged, commission @ 2% of Rs. 13,47,01,513/- as, allegedly, unexplained expenditure u/s 690 of the Act for arranging accommodation entry.
3. That the order dated 06.03.2025 passed u/s 250 of the Income tax Act, 1961 by the Commissioner of Income Tax (Appeals)-26, New Delhi is against law and facts on the file in as much as he was not justified to resort to the reassessment proceedings u/s 148 and accordingly the notice issued under section 148 of the Act is bad in law in as much as the reassessment proceedings:-
(i) have been initiated and conducted without complying with the statutory mandatory requirements and procedures laid down in section 147 to section 151 of the Act, 4 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT
(ii) are time barred as per the first proviso to section 149 and the grandfathering provisions prescribed therein,
(iii) are time-barred in as much as neither any income represented by an "asset has escaped assessment" nor is there any valid "information" within the meaning of section 147/148 of the Act
(iv) have been initiated solely on the basis of information received from Investigation Wing without any independent application of mind/conducting enquiry with respect thereto:
(v) are unlawful and bad in law since the same have been initiated consequent upon search u/s 132 in the case of PMC Fincop Ltd. whereby, if at all, the proceedings should have been initiated u/s 153C of the Act.
4. That the order dated 06.03.2025 passed u/s 250 of the Income-tax Act, 1961 by the Commissioner of Income Tax (Appeals)-26, New Delhi is against law and facts on the file in as much as the same has been framed in violation of the basic principles of natural justice since:-
(i) as the same is based on statements of a third party and not supported by any independent findings or any cogent material.
(ii) no opportunity was provided to cross examine Sh. Raj Kumar Modi (Managing Director of PMC Fincop Ltd) thus, making the assessment bad in law;
(iii) the proceedings have been concluded without passing a speaking order.
5. That the order dated 06.03.2025 passed u/s 250 of the Income-tax Act, 1961 by the Commissioner of Income Tax (Appeals)-26, New Delhi is against law and facts on the file in as much as he has not justified to uphold the action of the Learned Assessing Officer in framing the assessment without complying with and following the mandatory procedures laid down by the Central Board of Direct Taxes from time to time in particular as laid out in circular No. 19 of 2019 relating to mandatory mentioning of DIN in the assessment order and notice u/s 148 of the Act failing which the same is invalid, bad in law and void ab-initio."
5. Since all the grounds of appeal are with respect to the action of the AO in treating the long term capital gain of Rs. 13,47,01,513/- as bogus accommodation entry and further making addition of Rs. 26,94,030/- towards alleged commission 5 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT paid as unexplained expenditure u/s 69C for obtaining such gain, therefore, all the grounds are taken together for consideration.
6. Before us, Ld. AR for the assessee submits that a search and seizure operation was carried in the case of one Raj Kumar Modi on 11.10.2018 and based on the investigation report in the case of Raj Kumar Modi, presumption u/s 132(4) of the Act is drawn against the assessee. The Ld. AR submits that no document whatsoever is referred for invoking the presumption u/s 132(4) against the assessee. The ld. AR submits that the assessee has purchased shares of PMC and payment was made through banking channels. Copies of purchases bills along with copy of the bank statements where the payments against such purchases were transferred to the respective sellers, were submitted to the AO. Ld. AR further stated that shares were purchased in Financial Year 2011-12 and the copies of bills are placed at PB 96 to
97. Thereafter, the said shares were credited to the Demat account of the assessee and were sold during the year under appeal through broker namely Sh. Escorts Limited in recognized Stock Exchange on various dates. The necessary copies of the contract notes and the sale bills along with the ledger account of the assessee in the books of broker and the bank statement wherein the credit of sale proceeds were appearing as filed before the AO are placed at PB pages 88 to 308. The Ld. AR further submits that the AO has based his allegation on the statement of Sh. Raj Kumar Modi however, no opportunity to cross examination Sh. Raj Kumar Modi was provided, even after making specific requests made vide letter dated 10.05.2023 placed at PB pages 312 to 317. Ld. AR also submits that all the transactions related to sale and purchases of shares were carried out though proper bill and vouchers and the sales proceed as well as purchased consideration were transacted through banking channels. Ld. AR further drew our attention to page 27 of PB which is the order dated 12.09.2023 passed by the Securities Appellate Tribunal (SAT) in the 6 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT case of PMC Vs. Sebi in Misc. Application No.370/22 and appeal No.2151/22 wherein the hon'ble Tribunal has held that the company PMC is not involved in any kind of price rigging as has been held by the Sebi in its order dated 28.08.2023. The Ld. AR submits that once the AO reached to the conclusion of bogus LTCG on two facts, first Sh. Raj Kumar Modi and his trusted persons Sh. Manish Gupta had admitted in their statements recorded that they have provided accommodation entry bogus long term capital gain to the assessee and second the SEBI has held the company PMC as involved in price Rigging for providing long term capital through Raj Kumar Modi. The Ld. AR submits that opportunity to cross examination Shri Raj Kumar Modi and Shri Manish Gupta was never provided, despite of repeated request and thus, it is violation of principle of natural justice. For this, reliance is placed on the judgement of Hon'ble Supreme Court in the case of Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II reported in [2015] 62 taxmann.com 3 (SC) and in the case of PCIT vs. Hadoti Punj Viikas Ltd. reported in [2023] 157 taxmann.com 193 (SC) and in the case of PCIT vs. Anand Kumar Jain reported [2021] 133 taxmann.com 289 (SC). The Ld. AR further submits that there was no material whatsoever was found with respect to the transactions carried out by the assessee with Shri Raj Kumar Modi, therefore, the presumption u/s 132(4) is not applicable and no addition should be made solely based on the statements of third party. The Ld. AR finally submits that Ld. CIT(A) has changed the addition made by the AO u/s 69A as unexplained investment to section 68 of the Act without providing any opportunities to the assessee. Ld. AR also placed reliance on the various judgments of the Hon'ble High Courts and Co- ordinate Benches of Tribunal wherein the LTCG from the sale of shares of PMC was held as bogus accommodation entry and were deleted, which are as under:
(i) Ankit Khandelwal vs. Income-tax Officer [2025] 173 taxmann.com 851 (Delhi).7 ITA No.3033/Del/2025
(ii) Rama Mittal vs. ITO, NFAC [2024] 163 taxmann.com 612 (Amritsar-Trib.)
(iii) DCIT vs. Godavari Corporation Limited [ITA No.6043 & 6044/Mum/2024]
7. On the other hand, Ld. CIT-DR vehemently supported the orders of lower authorities and submits that since the order was not passed u/s 153C of the Act thus there is no question of referring to any incriminating material found as a result of search in support of the additions made. He further submits that the notice u/s 148 was issued after obtaining statutory approval and the order u/s 148A(d) of the Act as passed wherein all such objections raised by the assessee were duly considered. Ld. CIT DR further submits that the assessee was provided sufficient opportunities to establish the long term capital gain as genuine and all the statements etc. as available with the AO were provided to the assessee. Ld. CIT DR further submits that from the perusal of the statements of Sh. Raj Kumar Modi as reproduced in the assessment order, it could be seen that the AO has discussed at length the modus operandi carried out by the entry providers and further the movement of share price of PMC in market and thus hold that the sale of shares of PMC is the sham transactions. In last, Ld. CIT-DR vehemently supported the orders of the lower authorities and stated that surrounding circumstances also leads to believe that transactions declared by the assessee are not the valid transactions, and therefore, it is prayed that the orders of lower authorities be upheld.
8. Heard the parties and perused the material available on record. The sole issue in this case is with respect to the sale of shares of PMC Fincorp Ltd. and claim of long terms capital gain of Rs.13,47,01,513/- as exempt u/s 10(38) of the Act which was alleged as bogus accommodation entry by the AO. The AO has solely relied upon report supplied by the Investigation Wing which include the statements of Shri Raj Kumar Modi and his trusted person Mr. Manish Gupta, recorded during the 8 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT course of search carried out in their case wherein they had admitted that they have provided accommodation entries of long term capital gain to various beneficiaries and assessee is one of them. It is further observed that AO has also referred the order of the SEBI wherein the SEBI has held the company PMC as one of the party involved in fictitious transactions and price rigging and therefore concluded that the transactions of purchases and sale of shares of PMS carried out by the assessee are not genuine and the long term capital gain from the such transactions was bogus.
9. We observed that the assessee during the course of assessment proceedings has filed all the plausible evidences and details to establish the genuineness of the purchases and sales of shares of PMC which includes the copies of bills for purchases of shares, copies of the bank statements showing relevant entries of payment of purchase consideration through banking channel were also filed before the AO. Besides this, copies of the Demat account statements and copies of all the contract notes and sale invoices regarding sale of shares on various on dates were also filed along with copies of the statements of account of the assessee in the books of broker. Further the assessee filed the copies of the bank statement showing the receipts of sale proceeds. The AO failed to controvert all these evidences filed by the assessee nor any contrary material except the so called statements, was brought on record to hold these details as invalid. It is further observed that nowhere in the statements recorded of Raj Kumar Modi and Manish Gupta, they stated the name of the assessee nor admitted providing any accommodation entry alleged bogus long term capital to the assessee. We further observed that the Security Appellate Tribunal had quashed the order passed by the SEBI in case of PMC Fincorp Ltd wherein the company was charged guilty of price rigging of its share price to benefit to its shareholders for bogus LTCG and, therefore, the allegations and conclusions 9 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT drawn of bogus LTCG by the AO based on the said order of SEBI has no legs to stand.
10. The Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise (supra) has held that the cross-examine of the witness is precondition which in the instant case has not been followed. This proposition is reconfirmed by the Hon'ble Supreme Court in the case of PCIT vs. Hadoti Punj Vikas Ltd. The Co-ordinate Bench of Amritsar Tribunal in the case of Rama Mittal vs. ITO (supra) after considering the fact of not providing the opportunity of cross examination held the assessment order as invalid, the relevant observations are as under:
"10. It is noted that the assesses has established its claim before the lower authorities, based upon the documents namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. and that the appellant held the shares for a period of more than one year and sold them through recognized stock exchange and paid STT. Meaning thereby that the assesse has complied all the conditions of section 10(38) of Income Tax Act, 1961 to claim, long term capital gain of Rs. 65,01,278/- earned by the appellant was exempt as per provisions of section 10(38) of the Income Tax Act, 1961 and same has been duly declared in the income tax return of the assessee.
11. From the record, it is found that the addition made by the AO and upheld by the CIT(A) was solely based on the premise of alleged price rigging in the PMC Fin Corp script. However, this allegation is negated by the Securities Appellate Tribunal Mumbai, in its order dated August 28, 2023, by explicitly dismissed these allegations. The tribunal's ruling stated that there is no supporting material on record to substantiate the accusation of the company's involvement in price inflation. Moreover, the order emphasized that purchasing shares from the stock exchange platform is not unlawful, and continuous buying of shares at increased prices does not contravene any provisions of SEBI laws, particularly the PFUTP Regulations. (APB, Pgs. 76-88).
12. The Hon'ble SUPREME COURT OF INDIA in the case of Pr. CIT v. Renu Aggarwal (2023) 153 taxmann.com 579/294 Taxman 521/456 ITR 249 (SC), dismissed the SLP filed by revenue filed against the Hon'ble high court where adjudicating the matter on Section 69A, read with section 10(38), of the Income-tax Act, 1961-Unexplained moneys (Share dealings) - High Court by Impugned order held that where Assessing Officer disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were 10 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT being misused for providing bogus accommodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by Assessing Officer had rightly been deleted - Whether SLP filed by revenue against said impugned order was to be dismissed-Held, yes [Para 2] [In favour of assessee).
13. In the case of Pr. CIT v. Mamta Rajivkumar Agarwal [2023] 155 taxmann.com 549/295 Taxman 512 (Gujarat), the Hon'ble HIGH COURT OF GUJARAT has observed on exemption of capital gains under Section 10(38) of the Income-tax Act, 1961 as under-
"Section 10(38) of the Income-tax Act, 1961-Capital gains Income arising from transfer of long term securities (Share dealings) - Assessment year 2013- 14-Assessee had sold shares of SNCFL and earned long-term capital gains Assessing Officer issued a show cause notice alleging that transaction was a penny stock deal aimed at illegitimately claiming long-term capital gain exemption under section 10(38) -Assessing Officer treated purchase as bogus and added it to total income Commissioner (Appeals) examined all relevant documents provided by assessee, including bills of purchases, broker account copies, bills for sales, and bank statements and held that purchases were made through a recognized broker via cheque, establishing their genuineness and, thus, he directed Assessing Officer to delete addition of LTCG claimed as exempt under section 10(38) Tribunal upheld Commissioner (Appeals) decision stating that there was no evidence implicating assessee or broker in any wrongdoing related to SNCFL script - Whether in view of concurrent findings of fact that there was no evidence available on record suggesting that assessee or his broker was involved in rigging up of price of script of SNCFL, addition on account of LTCG claimed as exempt under section 10(38) had rightly been deleted - Held, yes [Paras 4 and 5] [In favour of assessee]"
14. In another case of Pr. GIT v. Indravadan Jain, HUF [2023] 156 taxmann.com 605/[2024] 463 ITR 711 (Bombay), the Hon'ble HIGH COURT OF BOMBAY held as under-
"Section 68, read with section 10(38), of the Income-tax Act, 1961 Assessment year 2005-06 Assessee had claimed sale proceeds of shares as long-term capital gain (LTCG) exemption - However, Assessing Officer held that scrip was a penny stock and thus, he made addition of same under section 68 - Commissioner (Appeals) observed that shares were purchased on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DEMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange and, accordingly, held that there was no reason to add capital gains as unexplained cash credit under section 68-Whether Tribunal had rightly concluded that there was no merit in appeal against Commissioner (Appeals) order Held, yes [Para 4) [In favour of assessee]"11 ITA No.3033/Del/2025
15. Recently, the Hon'ble Apex Court in the case of Pr. CIT v. Dipansu Mohapatra [2024] 160 taxmann.com 289/298 Taxman 194/463 ITR 681 (SC) dismissed against order of High Court that where assessee provided all details of purchase and sales of shares to AO along with contract notes for purchase and sale, demat account and bank statement and, furthermore no incriminating materials were found during survey conducted in premises of assessee, AO could not deny claim under section 10(38) merely by relying on statements of accommodation entry providers which were recorded much before date of survey.
16. The Judgement of Hon'ble Kolcutta High Court in the case Pr. CIT v. Swati Bajaj [2022] 139 taxmann.com 352/288 Taxman 403/446 ITR 56 (Calcutta), relied by the department is not applicable to the facts of the present case and same is distinguished as under:
(a) In the case of Swati Bajaj, the Script was of that Surabhi Chemicals and Investment Limited for a duration of 17 months whereas in the present case the script was of PMC Fin Corp. Ltd. being for duration of 4 Years. (APB, Pg. 176, Para 7)
(b) In the case of Swati Bajaj, Investigation report was Available in public domain and substantiate portion has been reproduced in the order whereas in this case it was neither available nor provided to the appellant.
(c) In the case of Swati Bajaj, Survey was conducted on broking entities and the brokers admitted that accommodation entries were provided but in the present case, the assessee has purchased the shares from RELIGARE SECURITIES Ltd. and there was no such survey or admission by the broker.
(d) Number of beneficiaries Identified but No such identification provided to assessee (APB, Pg.83 para 9.6)
(e) Price Rigging was established that Surabhi Chemical scrip were involved in artificial rigging of price to provide bogus LTCG whereas in the instant case, the order of adjudicating authority of SEBI was challenged before Security Appellate Tribunal Mumbai and it has been held by the Tribunal that buying shares from stock exchange is not a crime and does not violate any provisions of SEBI (APB, Pg 85, para 14)
17. Considering the factual matrix of the case and judicial precedents, we hold that the decision of the Ld. CIT(A) is infirm and perverse to the fact on record. We hold that there was no reason to add capital gains as unexplained cash credit under section 68 of the Act. Accordingly, the addition of Rs. 66,56,020/- is deleted."
12 ITA No.3033/Del/202511. Similarly, the Co-ordinate Bench of ITAT, Mumbai in the case of DCIT vs. Godavari Corporation Limited, vide order dated 17.01.2025 in ITA Nos.6043 & 6044/Mum/2024 has considered the transactions of sales of share of PMC Fincorp Ltd. and held the long terms capital gain as genuine transactions. The relevant observations of the Co-ordinate Bench as contained in para 9 & 10 are as under:
"9. We have carefully gone through the impugned order dated 26.09.2024 passed by learned CIT(A) and the material on record. The relevant paras 6 to 7.4 of the impugned order passed by learned CIT(A) are reproduced as under:
6. In the above background and after considering the entire material on record, the appeal is proceeded to be decided.
7. Points nos, a to j of Ground No. 1: The issue in these points relates to the additions made by the 40 w/s. 69C of the Act. Although the ground of appeal speaks of Sec. 680, the AO has made additions us. 69C of the Act. During the course of personal hearing the appellant stated that the grounds be considered against the Sec. 69C additions made by the AO.
7.1. According to the A0, the transactions in the shares of M/s PMC Fincorp Ltd. lack genuineness. After detailed discussion on the issue, the AO added entire purchase cost of Rs 2,39,93,359/- as taxable income u/x. 69C of the Act.
He further saved a sum of Rs. 4,79,867 being 29% of the purchase cost as unexplained commission expenditure.
7.2. According to the appellant, the entire investments are recorded in the books of accounts and that provisions of Sec. 69C do not apply. The appellant has also furnished contract note, trade confirmations, etc. The appellant has further submitted that it was a victim of financial fraud perpetrated by individuals named Mr. Mahendra Shah, Mr. Trilok Chand Kothari. Mr. Akash Doshi, Mr. Richi Doshi and Mr. Rajbi Doshi 7.3. The appellant has also submitted that the transactions were conducted through M/x SW Capital Pvt. Ltd. and that it was eventually defrauded by them. It is the case of the appellant that criminal complaints and FIR had been filed between 2016 and 2018.
7.4. Having considered the facts on record, I am of the view that the appellant deserves the benefit of doubt. The appellant has furnished the copies of complaints before the AO which shows that the first of the complaints to the Senior Police Inspector, D.B. Marg Police Station, Mumbai was filed dated 03.06.2016 with receipt stamp of 27.12.2016, Thus, this was much before the search action in the case of M/s PMC Fincorp Group. The complaint letter 13 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT includes the name of the appellant as an affected party. Subsequent complaints have also been filed before the police including dated 19.10.2018. Given this set of facts, I am of the view that an addition u/s. 69C for unexplained expenditure is not warranted in the case of the appellant. It is a fact that the sum of Rs. 2,39,93,359/- represents the purchase cost. No evidence has been brought out by the AO that such expenditure has been incurred outside the regular books of accounts. Considering the overall facts, the addition made u/s. 69C of Rs. 2,39,93,359/- and Rs.4,79,867/-stands deleted."
10. We notice that learned assessing officer has made the aforesaid additions on the ground that the assessee entered into transactions in the scrip of PMC Fincorp Ltd., which was found to be bogus scrip on the basis of search investigation. However, the entire investments were recorded in assessee's books of accounts. The assessee bought and sold the shares through a recognised stock exchange, where the assessee had no control. The payments have been made through banking channels. No independent inquiry was conducted by the learned assessing officer. It is further noticed that the assessee filed first information report in the DB police station, Mumbai in respect of the fraudulent transactions entered into by assessee's broker without assessee's knowledge. Learned assessing officer has ignored all these material facts. Learned assessing officer thus failed to bring out any evidence to show that the purchase cost of Rs. 2,39,93,359/- was incurred by the assessee outside regular books of accounts. Learned CIT(A) has thus rightly deleted the aforesaid amount. The aforesaid point is accordingly determined in negative against the appellant revenue and in favour of the respondent assessee. The impugned order is thus sustainable and the revenue's appeal is liable to be dismissed."
12. The Hon'ble Gujarat High Court in the case of Pr. CIT v. Mamta Rojiv kumar Agarwal reported in [2023] 155 taxmann.com 549 (Gujarat) under identical facts held that the transaction of sale of shares was not a penny stock. The relevant extract of the said decision is cited hereunder for ease of reference:
"3.3 The Tribunal confirmed the findings of the CIT(A) insofar as, it held in favour of the assessee. Findings of the Tribunal indicate that the assumption of the AO that the transaction carried out by the assessee are similar to the modus operandi of penny stock was misplaced. The Tribunal on facts observed thus:
"11.1...On analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, sales is not possible without having the purchases. Thus, once purchases has been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the 14 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he's allowing the benefit of the cost of acquisition for the shares while determining the bogus long term capital gain....
11.2 It was alleged by the AO that the price of the share of M/s Shree Nath Commercial & Finance Ltd., increased in a short period of time which is not in commensurate to the financial performance of the company. The rise in the price of the scripts of a company, having no financial base/ business activity /profitability certainly gives rise to the doubt about such increase in the price. But in our considered view, this cannot be a sole criterion for reaching to the conclusion that the bogus long-term capital gain was generated which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in detail and the same cannot take the place of the evidence. But in the case on hand, there was no finding that the enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s Shree Nath Commercial & Finance Ltd. Similarly, there was no finding with subsequent market price of the impugned scrip. We also note that there was no dispute raised by the Revenue with respect to the following facts:
1 Shares were purchased through broker on recognized stock exchange.
2. Purchase consideration of share was made through cheque.
3. Share was duly dematerialized in D-mat account.
4. Shares were sold through stock exchange after the payment of STT. The transactions have been confirmed by brokers.
5. The payments were received through ECS in the D-mat account.
6. Inflow of shares are reflected in D-mat account. Shares are transferred through D-mat account and buyer are not known to the assessee.
7. There is no evidence that the assessee has paid cash to the buyer or the broker or any other entry provider for booking LTCG and share were purchased by the determined buyer.
4. Hence, the Tribunal held, and in our opinion rightly so that there was no evidence available on record suggesting that the assessee or his broker was involved in rigging up of the price of the script of Mis Shree Nath Commercial & Finance Ltd. The assessee had acted in good faith. The Tribunal, therefore, correctly held that the Assessing Officer had acted only on assumption which was misconceived. The CIT(A) order dismissing the revenue's appeal was confirmed. "15 ITA No.3033/Del/2025
13. The hon'ble Supreme court in the case of PCIT Vs. Genuine Finance Pvt. Ltd. reported in (2024) 162 Taxmann.com 700(SC) has dismissed the SLP filed by the department. The relevant head note reads as under:
Section 28(i)of the Income-tax Act, 1961 - Business loss/deduction - Allowable as (Bogus purchases) - Assessment year 2012-13 - Additions were made to income of assessee on account of bogus loss incurred in penny stock which were deleted by Tribunal - Revenue submitted that order of Tribunal was ex facie erroneous, illegal and perverse because Tribunal deleted additions without appreciating that transaction was pre-arranged as well as sham and was carried out through penny scrip company
- However, Tribunal had observed in impugned order that assessee was continuously dealing in share trading of various shares/scrips and said fact was not disputed - Further, Tribunal had observed that scrip of VAS was not black listed by SEBI at relevant point of time - Tribunal had also considered order passed by SEBI and nowhere in said order, scrip of VAS was blacklisted or was penny stock or sham and bogus scrips/shares - Tribunal had also observed that entire transaction of purchase and sale of scrips was through Stock Exchanges, through authorized brokers and payments made to brokers were reflected in bank account - Tribunal had therefore opined that merely on conjecture and surmises, Assessing Officer could not make disallowance - High Court by impugned order held that in view of observations made by Tribunal, issue involved was purely a question of fact, and no question of law, much less, substantial question of law arose for consideration - Whether since there was gross delay of 224 days in filing this special leave petition and reasons assigned for condonation of delay were not sufficient, application seeking condonation of delay was to be dismissed and consequently, special leave petition was to be dismissed - Held, yes [Paras 1 and 2] [In favour of assessee]
14. Similarly in the case of PCIT Vs. Renu Agarwal reported in (2023) 153 Taxmann.com 579 (SC), the hon'ble Apex court has dismissed the SLP filed by the revenue.
15. Further, the Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax-12 v. Smt. Krishna Devi reported in [2021] 126 taxmann.com 80 (Delhi) held as under: -
"8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not 16 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453.
9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips.
10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter.
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 astounding4849.2% 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 Section10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were 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 17 ITA No.3033/Del/2025 Harish Chaurasia vs. DCIT 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 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 v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns ITA 125/2020 and connected matters Page 10 of 10 on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue.18 ITA No.3033/Del/2025
Harish Chaurasia vs. DCIT
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.
15. Accordingly, the present appeals are dismissed."
16. It is further observed that the assessee has been able to demonstrate that purchases consideration of was made through banking channel and the sales were made through recognized stock exchange i.e. Bombay Stock Exchange and the necessary copies of the contract notes and sale bills were submitted which were not doubted. Once it is not in dispute that the shares were hold by the assessee in the Demat account for a period of more than one year and were sold through online mode via recognized stock exchange and proceeds were received through banking channel. Thus without any clinching evidence that such transaction is sham transactions, based on some material found as a result of search or brought on record by making independent enquiries, merely on the basis of general statements of third person that too without providing opportunities of cross examine of such person, no addition could be made by holding the LTCG as bogus. It is also observed that Ld. CIT(A) has changed the addition made as unexplained investment u/s 69A of the Act to unexplained cash credit u/s 68 without providing any opportunities to the assessee. It is further observed that Ld. CIT(A) has held that assessee has not discharged the onus casted upon him to prove that the presumption u/s 132(4A) is not applicable. In this regard, we find that presumption u/s 132(4A) of the Act is against the person from whose possession document/evidence were found/seized and not any other persons, therefore, the presumption u/s 132(4A) of the Act was wrongly applied by the lower authorities.
19 ITA No.3033/Del/202517. In view of the above discussion, and by respectfully following the decisions of hon'ble Apex court and of jurisdictional high court stated herein above, we are of the considered opinion that long term capital gain declared by the assessee from sale of shares of PMC Fincorp Ltd. of Rs. 13,47,01,513/- is genuine and, accordingly, addition made and uphold by ld. CIT(A) is hereby deleted. Once we hold the transaction of sale of shares of PMC as genuine transactions, there is no occasion to allege that assesse has paid commission to obtain such long term capital gain and, accordingly, the addition made of Rs.26,94,030/- u/s 69C of the Act is also deleted. Accordingly, all the Grounds of appeal taken by the assessee are allowed.
18. In the result, the appeal of the assessee is allowed.
Order is pronounced in the Open Court 25.03.2026.
Sd/- Sd/-
(SUDHIR KUMAR) (MANISH AGARWAL)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 25.03.2026
*PK, Sr. Ps*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI