Income Tax Appellate Tribunal - Mumbai
Ito 41(3)(1), Mumbai, Mumbai vs Deepika Anil Agarwal, Mumbai on 6 August, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER&
SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER
ITA No. 1885/Mum/2025
(Assessment Year: 2011-12)
ITO 41(3)(1) Vs. Deepika Anil Agarwal
847, Kautilya Bhawan 501, Sidhi Bldg, Mala
Mumbai. West.
PAN/GIR No.AKOPA7202Q
(Applicant) (Respondent)
Assesseeby Shri Vimal Punmiya, CA
Revenue by Shri Annavaran Kosuri, Sr. AR
Date of Hearing 22.07.2025
Date of Pronouncement 06.08.2025
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the revenue challenging the impugned order dt. 22.01.2025 passed u/s 263 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2011-12.
2. All the ground raised by the revenue are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in deleting the additions made u/s 68 of the Act. Therefore we have decided to adjudicate the same through the present consolidated order.
3. Ld. DR appearing on behalf of the revenue while relying upon the order of AO submitted that the scrip M/s. Splash Media & Infra Ltd (Now know as Loharuka Media & Infra Ltd) is a penny stock scrip and the assessee during the course of assessment proceedings had categorically admitted that she was minor at the time of investment in the scrip and thus all the investments were made by her father Shril Anil Kumar Agarwal who operated a share broking company viz M/s. Comforts Pvt Ltd, whose case such action u/s 132 of the Income Tax Act was carried out by the Mumbai Investigation Wing and during the course of search action the said Shri Anil Kumar Agarwal in his statement recorded u/s 132(4) of the Act had categorically admitted that the said scrip to be a penny stock. It was further submitted that the said Anil Kumar Agarwal also stated in detail the process, how the transactions in penny scrip take place to the stock exchange with the connivance of commission agents on nominal commission in cash in order to provide bogus and LTCG / STCG through rigging of shares. Ld. DR also challenged the order of Ld. CIT(A) by submitting that Ld. CIT(A) deleted the additions while ignoring all the vital aspects which leads to the conclusion that M/s Splash Media & Infra Ltd was a penny script and that the assessee's investments in A grade shares such as Reliance Power etc, is very low and in very small quantity as compared to the investments made in the penny scrip of M/s. Splash Media and Infra Ltd. Thus requested to set aside the order of CIT(A) and requested to uphold the order of AO.
4. On the contrary, Ld. AR while relying upon the order passed by Ld. CIT(A) submitted that assessee had entered into a genuine transactions in the said scrip and therefore additions were wrongly made by the AO u/s 68 of the Act treating the total sale consideration received from sale of M/s. Splash Media & Infra Ltd as income from other sources. Ld. AR also relied upon his written submissions filed before us and the same is reproduced herein below:
A. Brief facts of the case
1. The appellant is an individual having income for the year under consideration from income from the head capital gain and income from other sources. Return of Income was originally filed on 21/07/2011 declaring total income of Rs. 1,11,889/- which was processed u/s.143 (1) of the Income Tax Act, 1961.
2. In the above return, the assessee had income from LTCG from sale of scrip M/s Splash Media of Rs. 3,56,92,613/- which was claimed exempt u/s 10(38) which reflected in the Profit and Loss Account. (PB Pg. No. 3)
3. The assessee is a regular investor. The same can be verified from Investment in the Balance Sheet (PB Pg No. 3 and 6). The assessee has sizable portfolio.
4. Further we would like to state that the father of appellant has purchased 10,000 shares of Splash Media & Infra Limited (Now Known as Luharuka Media & Infra Limited) on 21/12/2009 since appellant was minor at the time of investment. Further the company i.e. Splash Media & Infra Limited (Now Known as Luharuka Media & Infra Limited) has issued Bonus shares in the ratio of 3:1 {Three shares for every One share held} as a result of which the resultant shares has become 40,000 bonus share on 30.12.2009 further these shares were transferred in the Demat account of the appellant on 05.01.2010. Further the company i.e. Splash Media & Infra Limited (Now Known as Luharuka Media & Infra Limited) on 02.08.2010 has split the face value of shares of Rs 10/- each to the face value of Rs 1/- each resulting into the total holding of the appellant to 4,00,000 shares of the company which the appellant has sold in A.Y. 2011-12 on which the appellant has earned long term capital gain of Rs 3,56,92,613/-.
5. Subsequently assessment proceeding was reopened u/s 147 of the Income Tax Act, 1961 by issuing notice u/s 148 of the Income Tax Act, 1961 dated 24/03/2017 appellant vide her letter dated 27/03/2017 has requested Ld. AO to provide with reasons recorded for reopening assessment proceedings and issue of notice u/s. 148 of the Income Tax Act, 1961.
6. Ld. AO along with notice u/s 142(1) of the Income Tax Act 1961 dated 27.07.2017 has provided appellant with reason recorded for reopening of assessment proceedings, against said reasons recorded necessary objection has been filed on 12.09.2017 for reopening of the assessment proceedings, objection so raised by appellant was disposed by Ld. AO vide order dated 24.10.2017.
7. Ld. AO while completing assessment u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 vide order dated 29.12.2017, has assessed total income at Rs. 4,11,31,810/- by making addition u/s. 68 of the Income Tax Act, 1961 of Rs 4,10,19,922/- by treating total sales consideration received from the sale of shares of Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) as Income from Other Sources, without taking into considering details. documents and legal submissions made by A.R. of appellant during the course of assessment proceeding for justification of appellant claim relating to Long Term Capital Gain from sales of Shares of M/s. Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited).
8. Further it may be stated that above sale consideration from sales of shares of M/s. Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) has been duly reflected in the return of income after reducing cost of investment as Long Term Capital Gains and the same has been claimed as exempt income u/s. 10(38) of the Income Tax Act, 1961 however while completing assessment proceeding Ld. AO has been out rightly rejected appellant claim without bringing on to records or in assessment order any direct material evidence against appellant that appellant was one of the beneficiaries of bogus accommodation entries in the scrip of M/s. Splash Media & Infra Limited (Now Known as Luharuka Media & Infra Limited).
9. The case was reopened on mere information which was received from DIT (Inv.) Kolkata in respect of bogus LTCG claimed by the assesse on sale of penny stock script.
10. TheRespondenthad submitted to Ld AO all documents pertaining to sale and purchase of shares of M/s Splash Media like demat account statement, copy of bank statement reflecting payment and receipt of shares purchased and sold and relevant contract notes with detailed submission to prove the genuineness of the transaction.(PART OF PAPER BOOK32-56)
11. The Ld AO stating that the transaction of LTCG is a manipulated transaction done by respondent in connivance with MrAnil Agarwal to evade taxes on his unaccounted income and relying on statement made by Mr. Anil Agarwal treated the sale proceeds of Rs. 4,10,19,922/- as unexplained income and made anaddition of Rs. 4,10,19,922/- under section 68of the Income Tax Act,1961without considering the documentary evidences submitted by respondent during the assessment proceedings and passed order dated 29.12.2017 raising a demand of Rs.2,27,19,630/-.
12. The Ld. AO did not do analysis of facts and he only relied on information, without appreciating evidences. Ld. A.O. did not apply his mind and made addition without checking figure with collaborative evidences.
13. The Respondent then, through his share broker, sold the Shares after holding for more than a year at the recognized stock exchange and delivered the shares in demat form to the stock exchange clearing house and also received the sale consideration from the recognized stock exchange through the broker.
14. There is Neither reference of assesse's name in search report nor Department has proved cash trail.
15. The said statement made by Mr. Anil B Agarwal has been retracted on 15.04.2015 by way of an affidavit before notary public. There is no specific name taken in the affidavit given by Mr. Anil B Agarwal.
16. The Ld. AO did not do analysis of facts and he only relied on information, without appreciating evidences. Ld. A.O. did not apply his mind and made addition without checking figure with collaborative evidences.
A. BY HON'BLE NATIONAL FACELESS APPEAL CENTRE, DELHI The Respondent had preferred appeal before CIT-A, vide Appeal No. CIT (A) 41, Mumbai/10168/2017-18and contested the additions made by the A.O. of Rs. 4,10,19,922/-. The appeal was heard by NFAC and vide order no. ITBA/NFAC/S/250/2024-25/1072439520(1)dated 22.01.2024 the appeal was allowed.
The NFAC held as below, Para 6.9. Having discussed above, the analysis of the assessment order, contentions of the Appellant and legal positions in case of penny stocks and section 68, on merits of the issue it is found that, based on the unique facts the additions made by the AO in respect of LTCG claimed by the Appellant are not substantiated with any cogent evidences. In view of the above, Ground No.-2 and 3 of the appeal is hereby allowed. The sale of shares of M/s Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) is treated as genuine and exemption claimed in respect of long-term capital of Rs. 3,56,92,613/- u/s. 10(38) is allowed. Thus, the addition of the AO towards the said sale proceeds of Rs. 4,10,19,922/- is hereby deleted. Para 7. GROUND NO.-4: are general in nature and is not pressed by the appellant. Hence, Ground No.-4 of the appeal is hereby dismissed. Para 8. In the result, the appeal is PARTLY ALLOWED B. Being aggrieved by the aforesaid deletion, the Income Tax Department (appellant) has filed this appeal before your honor.
C. With regard to the grounds taken by the Appellant, the Respondent submits ground wise reply as per Form 35- GROUNDS OF APPEAL AS RAISED BEFORE THE CIT(A) GROUND NO 2 and 3
2. On the facts and in the circumstances of the case and in the law the learned AO has erred in passing the order u/s.143(3) r.w.s 147 of the IT Act, 1961 by treating sales consideration received from the sale of shares of M/s. Splash Media and Infra Limited Rs 4,10,19,922/- u/s 68 and adding them to the total income of the assessee under the head Income from other sources without taking into the considering documents and legal submission made by the AR of the assessee during the course of the assessment proceedings.
3. The Ld AO has further erred in not allowing Long Term Capital Gains exemption u/s. 10(38) of the I.T. Act, 1961 on sale of Shares of M/s. Splash Media and Infra Limited amounting to Rs 3,56,92,613/- after adjusting cost of investments though the shares were duly listed on re cognized stock exchange and STT has been paid on the sale value.
WHY AO MADE ADDITION i. The Ld AO reopened the case u/s 147, by issuing notice u/s 148 dated 24.03.2017 based on some information received from DIT (Inv.) Kolkata that during investigation carried out in connection with bogus LTCG claimed on penny stocks, it was found that the assessee had also obtained such accommodation entries in the form of bogus LTCG the sale proceeds of which were Rs.4,10,19,922/- and for availing such accommodation entries forming part of the unaccounted income of the assessee. ii. The Ld. AO on the basis of irrelevant materials and statement recorded on oath of MrAnil B Agarwal operator of M/s Splash Media wherein he has admitted of being a bogus entry provider and has provided bogus LTCG entry, the Sale consideration shown by the assessee from share transactions is treated as bogus and added as unexplained cash credit of Rs. 4,10,19,922/-. B. WHY ADDITION MADE BY A.O. IS NOT SUSTAINABLE In Assessment year i.e. A Y 2011-12Assessee sold shares and booked the Long Term capital gain. Summary is given as under. The brief facts of transaction are as under:
Name of scrip: Splash Media & Infra Ltd PURCHASE Date Name of Quantity Rate Date of Amount Chq the of amount Paid to No. Script Shares debited in Comfort Purchase Comfort Securities Securities Limited Limited 23/12/2009 Luharuka 10,000 528.10 30.12.2009 10,00,000 218786 Media & 01.01.2010 19,00,000 218787 Infotech 11.01.2010 20,00,000 218789 Ltd. 16.01.2010 3,94,250 218790 10,000 - 59,24,250 -
SALE
Date
of Amou Date
Recei nt of
pt of Recei Amou
Qty Mone ved nt
of y from Recei Name of
Name of the Ra Share Ch Net
Date Sha from Comf ved Bank
Script te s Sold gs sale
res Comf ort in Amt
Sold ort Secur our
Secu ities Bank
rities Limit Acco
Limit ed unt
ed
12- Splash 14- 14- Union
15,0 83. 12,47, 12,00, 1,8 12,45,
01- Media & 01- 01- Bank of
00 17 523 000 85 638
2011 Infra Ltd. 2011 2011 India
17- Splash 21- 21- Union
3,50 89. 3,12,3 3,60,0 47 3,11,9
01- Media & 01- 01- Bank of
0 25 87 00 2 15
2011 Infra Ltd. 2011 2011 India
27- Splash 31- 31- Union 14,
81,5 11 95,35, 60,00, 95,21,
01- Media & 01- 01- Bank of 40
00 7 573 000 168
2011 Infra Ltd. 2011 2011 India 5
07- Splash 10 16- 17- Union 15,
1,00 1,02,0 50,00, 1,01,8
02- Media & 2.0 02- 02- Bank of 41
,000 1,356 000 5,946
2011 Infra Ltd. 1 2011 2011 India 0
08- Splash 10 21- 22- Union
25,0 25,29, 5,50,0 3,8 25,25,
02- Media & 1.1 02- 02- Bank of
00 725 00 20 905
2011 Infra Ltd. 9 2011 2011 India
09- Splash 10- 11- Union 25,
1,75 98. 1,71,5 2,60,0 1,71,2
02- Media & 03- 03- Bank of 90
,000 01 2,330 0,000 6,421
2011 Infra Ltd. 2011 2011 India 9
21- 21- Union
10,00,
03- 03- Bank of
000
2011 2011 India
31- 06- Union
9,40,1
03- 04- Bank of
10
2011 2011 India
4,09, 4,10, 61, 4,09,
4,00
TOTAL 78,89 50,11 90 16,99
,000
4 0 1 3
Page 9 of 56
PURCHASE
Date Particular Qty Rate Amount
21-12-2009 Total Shares Purchased 10,000 528.63 52,86,281
14-12-2009 Bonus Share 3:1 30,000 - -
Total Shareholding 40,000 132.16 52,86,281
14-07-2010 Shares Split 10:1 4,00,000 13.22 52,86,281
SUMMARY
a) The revenue relied on the findings of the Directorate of Investigation of Mumbai and Kolkata and on responses of companies who were exit providers to beneficiaries in the scrip of M/s Splash Media & Infra Ltd which established that M/s Splash Media & Infra Ltd is a mere bogus company and Anil Agarwalis the operator of the Company.
b) It was noticed that these companies were engaged in issuing bogus bills for providing long term capital gain/loss, speculation loss/profit etc. It was noticed by the Ld. AO that the assessee has purchased shares of M/s Splash Media & Infra Ltd, one of the group companies of Shri Anil B Agarwal.
c) On this basis the assessee's case was brought under assessment without any tangible material on record and on basis of information and statement of third party.
d) The Statement of working of LTCG (Part of Paper Book Pg. No. 31) THE SUMMARY TO DETAILS, FACTS AND EXPLANATIONS IN THE CHRONOLOGICAL ORDER OF THE TRANSACTIONS OF LONGTERM CAPITAL GAIN TO ESTABLISH THE GENUINENESS OF THE TRANSACTION EXEMPT UNDER SECTION 10(38) ARE AS UNDER:
i. The Respondent's fatherhas made investment in the Shares ofM/s Splash Media & Infra Ltd (Now known as M/s Luharuka Media & Infra Ltd.), a Profit making company. The Respondent's father hadbought10000 shares @ 528.63initially when she was a minor which were later transferred to the assessee's account when she turned into a major Thus, the assessehad10,000 shares against which she received bonus shares and then the shares were split so the assesse had 4,00,000 shares which he sold during the year under consideration.(Pg. No.31of Paper Book) The respondent was also invested in other shares rather than Splash Media (part of Paper Book Pg. No. 41-42) ii. The Respondent's father has paid the full consideration from the respondent's bank account by account payee cheque and as such the payment was made through proper banking channel.
(Pg. No. 33 of paper Book) Page 10 of 56 iii. The shares were dematerialized and credited in the Respondents father'sdemat account on the same day i.e21.12.2009. (Pg. No.31of Paper Book) iv. The Company M/s Splash Media & Infra Ltd (Now known as M/s Luharuka Media & Infra Ltd.) issued bonus shares on 17.11.2009 in the ratio of 3:1 i.e against 10,000 shares the respondent received 30,000 shares totaling to 40,000 shares.(Pg. No.57of Paper Book) v. Thereafter the company in the year 2010 split the shares from face value of Rs.10 to Rs. 1 and thus the number of shares increased to 4,00,000 and same were credited in the respondents demat A/c. (Pg. No. 41of Paper Book) vi. The Respondent then, through her share broker, sold the Shares after holding for more than a year at the recognized stock exchange and delivered the shares in demat form to the stock exchange clearing house and also received the sale consideration from the share broker. vii. The shares were sold through M/s Comfort Securities Ltd. who were registered share brokers of Bombay Stock Exchange and Copies of sale bills issued by M/s ComfortSecurities Ltd. is part of paper book. (Pg. No. 44-54of Paper Book) viii. The said sales consideration duly came in Banking Channel and reflected in Bank Statement. (Pg. No.55-56of Paper Book) ix. There is Neither reference of assesse's name in search report nor Department has proved cash trail.
x. The assessee also submitted copy of DEMAT Account where the said share inwards and outwards clearly reflected in Transaction statement issued by M/s ComfortSecurities Ltd.
xi. The shares were sold through recognised stock exchange on which the respondent has paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house and the seller only receives sales consideration from the stock exchange through the share broker. Therefore, neither the seller was knowing the purchasers, nor the purchasers were knowing the seller. In absence of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing.There is Neither reference of assesse's name in search report nor Department has proved cash trail.Therefore, the Page 11 of 56 respondent cannot be said to be a part of the group indulging into rigging of share prices of the scrips as alleged by the Learned A.O. xii. During the course of assessment proceedings the respondent submitted following documents to substantiate his claim of long term capital gain which is exempted under section 10(38) of the Act:-
• Copies of sale bills
• Copy of bank statement
• Copy of demat account
• Copy of contract notes
xiii. However, one point to be noted that the finding of the Ld. AO is wrong and shows that the Ld. AO has no knowledge about the share transactions. The Ld.AO has relied on mere information by Investigation Directorate wing.Also the Ld. AO has wrongly claimed in the assessment order that the assessee has income from salary from two companies(Assessment Order Page - 10) when in reality during the year under consideration assesse only has income from Capital Gains and other sources.
xiv. It is pertinent to mention that the Respondent sold the shares during the month ofJanuary 2011 toMarch 2011 in the F.Y. 2010-11 from a price range of Rs. 83.17/- to 117/- per share as per the price chart attached. (Pg. No. 31 Paper Book) xv. The Respondent has purchased the shares through broker from Bombay Stock Exchange and sold at Bombay Stock Exchange through its share brokers. The shares were purchased in dematA/c and on sale, the demat shares were delivered to the clearing corporation of BSE through its share broker.
xvi. The Ld. AO denied the claim of long-term capital gain on sale of shares under section 10(38) and made addition of total sale consideration under section 68. The shares had been in demat form and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced from the bank statement. Thus, possession of the shares was not in doubt at all because same was also reflected in Demat account. xvii. Not only that, the sale of shares was also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and after the sale of shares, the net receipts had been credited to the assessee's bank account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the material facts on record were quite evident that it was from the sale of shares. As there was no tangible material brought on record to convert these transactions then it is very difficult to treat the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. There was no Page 12 of 56 evidence or any whisper that some unaccounted money had been routed and addition of sale proceeds needs to be deleted. xviii. The Ld. CIT(A) rightly mentions the following in the Order, "Based on the unique facts the additions made by the AO in respect of LTCG claimed by the Appellant are not substantiated with any cogent evidences. In view of the above, Ground No.-2 and 3of the appeal is hereby allowed. The sale of shares of M/s Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) is treated as genuine and exemption claimed in respect of long-term capital of Rs. 3,56,92,613/- u/s. 10(38) is allowed. Thus, the addition of the AO towards the said sale proceeds of Rs 4,10,19,922/- is hereby deleted."
SHARES OF M/S SPLASH MEDIA & INFRA LTD (NOW KNOWN AS M/S LUHARUKA MEDIA & INFRA LTD.), WHEREIN TRIBUNAL HAS DELETED THE ADDITION ARE AS UNDER:- (8 Cases) SR. Citation Observation NO.
1 IN THE INCOME TAX We notice that, in the instant case, the AO APPELLATE TRIBUNAL, has not established that the assessee was MUMBAI BENCH "F", MUMBAI involved in price rigging and further the AO Asst. Commissioner of Income did not find fault with any of the documents Tax furnished by the assessee. Hence, the ratio Vs. laid down in the above said cases by the Mrs. Rehana Mohammed Ali jurisdictional Hon'ble Bombay High Court Gheewala, (Legal heir of shall apply to the facts of the present case. Mohammed Ali Ebrahim Accordingly, we are of the view that the Gheewala) Ld.CIT(A) was justified in deleting the ITA Nos. 1487 & addition made by the AO in respect of 1503/Mum/2024 long term capital gains in the original assessment order and short term capital gains in the reassessment order.
16. In view of the above, the Ld.CIT(A) was justified in deleting the estimated addition of commission expenses. Accordingly, we confirm the orders passed by the Ld.CIT(A) on the three issues, viz., addition of sale value of M/s. Splash Media & Infra Ltd, and addition of commission expenses on estimated basis in the original assessment Page 13 of 56 proceedings and addition of sale value of M/s. Comfort Intech Ltd., in the reassessment proceedings.
In the result, both the appeals of the Revenue and the cross objection filed by the assessee are dismissed.
2 IN THE INCOME TAX 6.15 Finally, keeping in the facts and APPELLATE TRIBUNAL, circumstances of the case, we are inclined MUMBAI BENCH "A", to hold that impugned additions are not MUMBAI sustainable in the eyes of law. The Mr. Anil Agrawal (HUF) Vs assessee had discharged the primary DCIT-Central Circle-3(4) onus of establishing the genuineness of I.T.A. Nos.5512- the transactions whereas the onus as 5516/Mum/2019 casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The whole basis of making additions is third-party statement and no opportunity of cross- examination has been provided to the assessee to confront these parties. As against this, the assessee‟s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. Hence, going by the factual matrix and respectfully following the binding judicial precedents as enumerated in the order, the additions made by Ld. AO and confirmed by Ld. CIT(A), are not sustainable in the eyes of law. Therefore, we are inclined to delete the same. We order so. Consequentially, the addition of estimated commission also stands deleted. Ground Nos. 1, 3 & 4 stands allowed. No argument has been urged with respect to Ground No.2 which is related with fulfillment of requirement of Page 14 of 56 provisions of Sec.153D and therefore, this ground stand dismissed. The appeal stand partly allowed.
7.1 The facts in both these years are pari- materia the same. The assessment for both the year has similarly been framed u/s 143(3) r.w.s. 153A on 29/12/2017. The Long-term gains earned by the assessee on sale of scrip of SMIL have been treated as undisclosed income and added u/s 68. The Ld. AO has estimated commission of 6% in similar manner. The impugned order has confirmed the order of Ld. AO on similar logic and reasoning. Aggrieved, the assessee is in further appeal before us with identical grounds of appeal.
7.2 Facts being pari-materia the same including the fact that assessment for both the year is unabated assessment, our findings as well as adjudication as for AY 2010-11 shall mutatis-mutandis apply to both these year. Resultantly, the appeals for both the year stands partly allowed. 3 IN THE INCOME TAX The assessee was allotted warrants on APPELLATE TRIBUNAL, preferential basis from M/S Comfort Intech Ltd. on 20.05.2008 for Rs. 4,77,000/.
MUMBAI BENCH "A", Shares were issued in lieu of warrants MUMBAI which were listed on 21.11.2008 and listed Amit H. Patel (HUF) Vs. DCIT- on the exchange same date. Thereafter the shares were split in the ratio of 1:10 on CC 3(4) 14.10.2009. Similarly the assessee was ITA Nos.5761, 5762, 5764 & allotted warrants on preferential basis by 5765/M/2019 M/s Splash Media & Infra Ltd. and were converted into shares and listed on the stock exchange on 29.10.2009. thereafter there was a bonus issue in the ratio of 3:1 followed by shares split in the ratio of 1:10 on 27.07.2010. Both these shares went up spirally over a short period of time According to the Revenue the said transactions are suspicious and bogus which was revealed during the course of search and seizure action on the assessee. The search team found that these two companies M/s. Comfort Intech Ltd. and Page 15 of 56 M/s. Splash Media & Infra Ltd. which are listed on Bombay Stock Exchange were used for providing accommodation entries of long term capital gain/ short term capital gain.
Held that:
15. Therefore, respectfully, following the decision of the coordinate bench of the Tribunal, we hold that the long term capital gain on the sale of shares of M/s. Splash Media & Infra Ltd. is not a bogus capital gain as the AO has solely relied on the report of investigation/search team and has not carried out any further verification on the basis of documents furnished by the assessee. Similarly, the position of long term capital gain earned on the sale of shares of M/s. Comfort Intech Ltd. Of Rs.1,34,42,069/- is same as the assessee has filed all the necessary evidences before the AO and AO has failed to carry out any further investigation to prove that the long term capital gain earned by the assessee is bogus and fictitious. Consequently, theappeal of the assessee succeeds on merit also. Accordingly, the issue raised in ground No.3 & 4 are allowed.
16. The issue raised in ground No.5 is against the order of Ld. CIT(A) confirming the addition of Rs.46,64,066/- by Ld. CIT(A) as made by the AO under section 69 of the Act towards commission paid on the accommodation entries. Since we have already decided the grounds raising legal as well as merits in favour of the assessee and consequently the addition of Rs.46,64,066/- is also ordered to be deleted as this is consequential one.
Accordingly the ground No.5 is allowed.
17. Accordingly, the appeal of the assessee is allowed.
4 IN THE INCOME TAX ........
APPELLATE TRIBUNAL 4. The Assessing Officer recorded the following reasons for reopening of the DELHI BENCH: SMC: NEW assessment u/s 147 of the Act -
DELHI "Information has been received from Gopal Chand Mundhra Investigation Wing of the Income tax Department that large scale, manipulation and Sons Vs. ITO, Ward-55(5), had been done in the market price of shares New Delhi. of SPLASH MEDIA by a group of persons Page 16 of 56 ITA No. 1375/Del/2019 acting as a syndicate in order to provide 5 IN THE INCOME TAX entries of tax exempt long term capital gains to the assessee (beneficiary).
APPELLATE TRIBUNAL According to the information available, the DELHI BENCH: SMC: NEW assessee had traded in the above scrip to DELHI the tune of Rs.2374500/- during the financial year 2010-11 and bogus LTCG DamyantiMundhra Vs. ITO, amounting to Rs.2116776 /- had been Ward-55(5), New Delhi. facilitated to the assessee during the ITA No. 1721/Del/2019 financial year 2010-11. Hence, I have reason to believe that the above income of 6 IN THE INCOME TAX Rs. 2116776/- chargeable to tax has APPELLATE TRIBUNAL escaped assessment for the asst, year 2011- DELHI BENCH: SMC: NEW 12, within the meaning of sec.147 of the Income-tax Act."
DELHI
Ramdev Mundhra Vs. ITO, Held that:
Ward-55(5), New Delhi. 26. Since the assessee succeeds on this ITA No. 1722/Del/2019 legal ground challenging the validity of reassessment proceedings, the addition
7. IN THE INCOME TAX on merit is not being adjudicated being APPELLATE TRIBUNAL academic in nature. The appeal filed by DELHI BENCH: SMC: NEW the assessee is accordingly allowed.
DELHI
27. In these appeals also identical Shriya Devi Mundhra Vs. ITO, grounds have been taken by the Ward-55(5), New Delhi. respective assessees and in all these cases the approving authorities have ITA No. 1523/Del/2019 given approval to the reopening of
8. IN THE INCOME TAX assessment in a mechanicalmanner APPELLATE TRIBUNAL without due application of mind.
Therefore, following the reasons given in DELHI BENCH: SMC: NEW the preceding paragraphs, the DELHI reassessment proceedings initiated in Gopal Chand Mundhra Vs. the case of these assessees are also held ITO, Ward-55(5), New Delhi. to be not in accordance with the law and are accordingly quashed.
ITA No. 1524/Del/2019 28. In the result, all the five appeals filedby the respective assessees are allowed.
RELIANCE IS PLACED ON FOLLOWING CASE LAWS:-
Sr. CITATION OBSERVATION
No.
1. In the SUPREME COURT Section 10(38), read with sections 68 and 69, of
OF INDIA Principal the Income-tax Act, 1961- Capital gains -
Commissioner of Income- Income arising from transfer of long term
tax v. Kuntala Mohapatra securities(Illustrations)
SLP (CIVIL) DIARY NOS. - Assessment year 2014-15- Assessee filed its
5269 OF 2024 return for relevant year - Subsequently,
pursuant to a survey assessee filed revised return and claimed exemption in respect of long-term capital gains on shares under section Page 17 of 56 10(38) - Assessing Officer rejected assessee's plea and made additions undersections 68 and 69 by relying on statements from 'entry operators' - On appeal, Commissioner (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax - Tribunal upheld Commissioner (Appeal)'s decision, emphasizing assessee's right to correct mistakes and criticized Assessing Officer's reliance on statements from 'entry operators' to support additions under sections 68 and 69 as those statements were recorded in unrelated proceedings before survey on assessee, and assessee was not afforded an opportunity to challenge or cross - examine providers of those statements - On revenue's appeal, High Court confirmed order of Tribunal
- Whether there was no reason to interfere with order passed by High Court and therefore, SLP was to be dismissed - Held, yes [Para 3] [In favour ofassessee]
2. [2015] 54 taxmann.com Section 68 of the Income-tax Act, 1961 - Cash 108 (Bombay) HIGH credit (Share dealings) - Assessment years COURT OF BOMBAY 2003-04 to 2006- 07 - Assesse declared capital Commissioner of Income- gain on sale of shares of two companies - tax-13 v. Shyam R. Pawar* Assessing Officer, observing that transaction DECEMBER 10, 2014 was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assesse to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes [Para 7] [In favor of assesse]
3. [2014] 41 taxmann.com Section 10(38) of the Income-tax Act, 1961 -
118 (Hyderabad - Trib.) IN Capital gains - Exemption of, on transfer of THE ITAT HYDERABAD securities [Genuineness of transactions] - BENCH 'A' Income-tax Assessment year 2006- 07 - Assesse filed its Officer, Ward 2, return declaring long term capital gains on Nizamabad v. Smt. Aarti shares traded in Calcutta Stock Exchange - Mittal* NOVEMBER 6, Since sale transactions took place through 2013 authorized stock exchange and securities transaction tax was paid, assesse claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) Page 18 of 56 opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine -
Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assesse having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax - Whether on facts, transactions of purchase and sale of shares were to be regarded as genuine in nature and, therefore, assesses claim was rightly allowed - Held, yes [Para 23] [In favor of assesse]
4. [2017] 77 taxmann.com Section 10(38), read with section 147, of the 260 (Ahmedabad - Trib.) Income-tax Act, 1961 - Capital gains - Income IN THE ITAT AHMEDABAD arising from transfer of long-term securities BENCH 'B' Pratik (Bogus transactions) - Assessment year 2006- Suryakant Shah v. 07 - Assesse purchased 3000 shares of Income-tax Officer, Ward- company 'T' through a stock broker - These 10 (3), Ahmedabad* shares were transferred to assesses demat OCTOBER 21, 2016 account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assesse was one of beneficiary of such accommodation entries - Assessing authorities reopened assessment of assesse - Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assesse, assesses claim of exemptions of long-term capital gain on sale of shares could not be denied on basis of submission of said broker - Held, yes [Paras 17 and 18] [In favor of assesse]
5. ACIT vs. Vineet Bogus capital gains from penny stocks: The fact Sureshchandra Agarwal that the Stock Exchanges disclaimed the (ITAT Ahmedabad) ITA No. transaction is irrelevant because purchase and 1442/Ahd/2013 & CO No. sale of shares outside the floor of Stock 209/Ahd/2013 Exchange is not an unlawful activity. Off- Assessment Year : 2005- market transactions are not illegal. It is always 06 possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus
6. Surya Prakash Toshniwal Bogus capital gains from penny stocks: Long-
HUF vs. ITO (ITAT term capital gains claimed exempt u/s 10(38) Kolkata) ITA cannot be treated as bogus unexplained income No.1213/Kol/2016 if the paper work is in order. The fact that the Assessment Year :2005-06 Company whose shares were sold has violated SEBI norms and is not traceable does not mean Page 19 of 56 that the assesse is at fault
7. CIT vs. Mukesh S. 10(38)/ 68: Long-term capital gains on sale RatilalMarolia (Bombay of "penny" stocks cannot be treated as bogus & High Court) INCOME TAX unexplained cash credit if the documentation is APPEAL NO. 456 OF 200 7 in order & there is no allegation of 7th September 2011 manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity
8. Smt. Sunita Jain, V/s. The claim of the assesse cannot be denied on Income Tax Officer, the basis of presumption and surmises in Ward10 (3), Ahmedabad respect of penny stock by disregarding the ITA. Nos: 501 & direct evidences on record relating to the 502/AHD/2016 sale/purchase transactions in shares Assessment Year: 2008- supported by broker's contract notes,
09) confirmation of receipt of sale proceeds through regular banking channels and the demat account
9. ITO-24(3)(1) V/s M/s Where assesses broker share transaction was Arvind Kumar Jain HUF bone fide in all respect, merely because share ITA No. 4862/MUM/2014 broker was tainted violating SEBI regulations, Assessment Year: 2005-06 would not make assesses share transactions bogus.
10. Kamla Devi S. Doshi V/s. Bogus penny stocks capital gain: The s. 131 The Income Tax Officer statement implicating the assesse is not Ward 16(3)(1), I.T.A. sufficient to draw an adverse inference against No.1957/Mum/2015 the assesse when the documentary evidence in Assessment Year: 2006- the form of contract notes, bank statements,
07) STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error
11. Shri Sunil Prakash V/s. S. 68 bogus gains from penny stocks: If the AO ACIT -15(2) relies upon the statement of a third party to I.T.A./6494/Mum/2014, make the addition, he is duty bound to provide Assessment Year: 2005-06 a copy of the statement to the assesse and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68
12. S. 10(38) Bogus long-term gains from penny Pramod Kumar Lodha vs. stocks: The transaction cannot be treated as ITO (ITAT Jaipur) bogus until and unless a finding is given that the shares were acquired by the assesse from the person other than the broker claimed by the assesse. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assesse at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assesse
13. Bogus Capital Gains From Penny Stocks: In Navneet Agarwal vs. ITO order to treat the capital gains from penny Page 20 of 56 (ITAT Kolkata) stocks as bogus, the Dept has to show that there is a scam and that the assesse is part of the scam. The chain of events and the live link of assesses action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assesse. All imp judgements referred
14. Bogus capital gains from penny stocks: The fact ACIT vs. Vineet that the Stock Exchanges disclaimed the Sureshchandra Agarwal transaction is irrelevant because purchase and (ITAT Ahmedabad) sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off- market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus
15. Bogus Capital gains from penny stocks: Capital Meenu Goel vs. ITO (ITAT gains from penny stocks cannot be assessed as Delhi) unexplained cash credit u/s 68 if the assesse has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated
16. Dipesh Vardhan and others S. 10(38)/68: Bogus Capital Gains from vs DCIT-Central Circle Penny Stocks: The AO has not discharged I.T.A. No.7648, 7649, the onus of controverting the documentary 7650, 7651 and evidences furnished by the assessee and by 7662/Mum/2019 bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross- examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue Para 6 of the order states as follows:-The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee's account during the month of March, 2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 2009- 10 & 2010-11 which led to investment by the assessee in that entity was also furnished Page 21 of 56 during the course of assessment proceedings. Subsequently, M/s STL got merged with another entity viz. M/s SAL(Sunrise Asian Ltd.) pursuant to scheme of amalgamation u/s 391 to 394 of The Companies Act, 1956. The Scheme was duly approved by Hon'ble Bombay High Court vide order dated 22/03/2013, a copy of which is on record. Consequently, the shares of M/s STL held by the assessee got swapped with the shares of M/s SAL and new shares were allotted to the assessee during June, 2013 pursuant to the approved scheme of amalgamation. M/s SAL is stated to be listed public company Group 'A' shares signifying high trades with high liquidity. The assessee has sold these shares through its stock broker namely M/s Unique Stockbro Private Limited in online platform of the recognised stock exchange during the month of March, 2014. The selling price was in the range of Rs.489/- to Rs.491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was through clearing mechanism of the stock exchange and sale consideration was received through banking channels. The transactions are duly evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015.The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs.360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed.
Reliance is also placed on following case laws where such purchase and sale were allowed.
1. C.I.T Vs. Mukesh Marolia ITA 456 of 2007-Bombay HC Page 22 of 56
2. Muksh R Morolia V/s Add CIT(2006)6 SOT 247
3. ITO V/s. Mrs. Rasila N Gala ITA No.1773/Mum/2010
4. CIT V/s Kan Singh Rathore ITA 192of 2014 (Rajasthan HC)
5. M/s SBD Estate Private Limited V/s. ITO 584/Mum/2015
6. Ms Farrah Marker V/s ITO ITA No.3801/Mum/2015 order dated 27/04/2016
7. Mr.ArvindAsmal Mehta V/s ITO ITA No.2799/Mum/2015 order dated 29/02/2016
8. Smt Jyoti D Shah V/s ITO ITA No.1843/Mum/2012
9. ITO V/s Deep Darshan Properties Pvt Ltd.2117 & 2118/Mum/2014
10. CIT-13 V/s ShyamR.Pawar (2015) -54 Taxmaan.com108- Bombay High Court
11. JafferaliK.Rattonsey vs DCIT ITA No.5068 Mum 2009
12. Kamla Devi S. Doshi ITA No. 1957/Mum/2015
13. Pratik Suryakant Shah (2017)-77 Taxmann.com 260 Ahemdabad Tribunal
14. Aarti Mittal (2014) 41 Taxmann.com 118(Hyderabad Tribunal)
15. CIT Appeal order in case of Umang D Soni
16. C.I.T Mumbai Vs. Mukesh RatilalMarolia Supreme Court - 2015 (9) TMI 854 -
SUPREME COURT
17. The Commissioner of Income Tax-16. Vs. Mrs. Kesar A. Gada 2015 (1) TMI 1220 - BOMBAY HIGH COURT
18. Ramprasad Agarwal vs ITO2(3)(2), Mumbai[2018] 100 taxmann.com 172 (Mumbai - Trib.)
19. Shri Amar Nath Goenka Vs. The ACIT, Circle-20(1), New Delhi.
ITA.No.5882/Del./2018
20. Mukta Gupta vs. ITO, Ward-1(4), Ghaziabad .I.T.A. No.2766/DEL/2018
21. AJAY GOEL vs .I.T.O, WARD 39(5)ITA No. 4481/DEL/2018
22. Principal Commissioner of Income-tax,(Central), Ludhiana v. Prem Pal Gandhi (P&H HC)
23. CIT VS Bhagwati Prasad Agarwal ITA No.22/Kol/2009 Calcutta High Court
24. Mr. Shyam R Pawar vs DCIT Central Circle 24 & 26 ITAT Mumbai (ITA No.5585/M/11 , 5620,5621 & 5622/M/11)
25. CIT (Jamshedpur) vs Arun Kumar Agarwal (HUF) Jharkhand HC
26. PCIT (Ludhiana) vs Sh. Hitesh Gandhi P &H HC
27. ACIT Central Circle-II, Jalandhar vs Hitesh Gandhi ITAT Amritsar [I.T.A. No.129(Asr)/2014]
28. Manish Kumar Baid and Mahendra Kumar Baid vs ACIT,Cir-35, ITA No.1236,1237/Kol/2017[ Kolkata-Tribunal] Page 23 of 56
29. Shri Jignesh Desai vs Income Tax Officer 35(2),ITA No.1263/Kol/2017) [Kolkata-Tribunal]
30. Navneet Agarwal, Legal Heir of Late Kiran Agarwal vs ITO, Ward-35(3) ITA No.2281/Kol/2017 [Kolkata-Tribunal]
31. Kiran Kothari HUF vs ITO Ward 35(3), Kolkata ITA No.443/Kol/2017
32. Shri Gautam Kumar Pincha vs ITO 34(4), Kolkata (ITA No.569/Kol/2017)
33. Ketulkumar D Jaiswal vs ITO S.K. ward-4 Modasa (ITA No. 546/Ahd/2015 ) [Ahemdabad-Tribunal]
34. CIT-I Jaipur vs Smt Pooja Agarwal , Shri Jitendra 2017 Rajasthan High Court
35. Shri Pramod Jain, Shri Ankit Jain, Shri Sunil Jian, Naina Jain and Smt .Nisha Jain vs DCIT & ITO Wd 3(2) Jaipur [Jaipur -Tribunal]
36. Shri Vivek Agarwal vs ITO Wd 1(2), Jaipur [Jaipur -Tribunal]
37. MrVimalchandGulabchand ,Mr Praveen Chand , Mr.Gatraj Jain & Sons (HUF), MrMahendra Kumar Bhandari vs ITO Chennai , ITA No. 2003,1721,2293,2748/CHNY/2017 [Chennai -Tribunal]
38. Anand Paul vs ACIT Circle-50 ITA No.165/Kol/2015 [Kolkata -tribunal]
39. M/s Bhoruka Engineering Industries Ltd vs DCIT Bangalore, KARNATAKA HIGH COURT
40. CIT vs Pushpa Malpani ITA No.50 of 2010 Rajasthan HC
41. M/s Amit Rastogi HUF , Shilpa Rstogi, Sadhana Rastogi, Ajay Kumar Rastogi vs ITO wd1(1) wd-2(3), Meerut ITA No.2128/2129/2131/2132/Del/2018 [Delhi-Tribunal]
42. Smt Shikha Dhawan vs ITO, Wd-4(2) ITA No.3035/Del/2018 [Delhi-Tribunal]
43. Shamim Imtiaz Hingora, Parvez Hingora, Shabeena Irfan Hingora, Arif Abdul RazakHingora vs ITO Wd-I Jalna, ITA No.1875,1876,1877,1878/Pun/2018 [Pune-Tribunal]
44. CIT (A)-45, MUMBAI order in case of Parul Hemant Patel
45. Mukesh B Sharma Vs ITO 11(3)(2) ITA No.6249/Mum/2018
46. Deepak Nagar Vs The ACIT-17 ITA No. 3212/Del/2019
47. Kaushalya Agarwal Vs ITO 35(3) ITA No.194/Kol/2018
48. VijayrattanBalkrrishan Mittal Vs DCIT ITA No. 3427, 3428, 3429/Mum/2019
49. Amit Mafatlal Shah vs ACIT ITA No. 5793/MUM/2019
50. Dipesh Ramesh Vardhan and others vs DCIT CC 2(2) ITA No.7648, 7662, 7651, 7650 and 7649/MUM/2019
51. Nishant Kantilal Patel and Others vs. ITO ITA No 05,06,07 and 10/SRT/2019
52. SUPREME COURT OF INDIA Principal Commissioner of Income-tax v. Kuntala Mohapatra SLP (CIVIL) DIARY NOS. 5269 OF 2024 Page 24 of 56
53. ACIT 4(1)(1), Mumbai Vs. Ankur AgrawalITA No. 5179/MUM/2024
54. ACIT vs Abhishek Rajendrakumar Mundra ITA 3929/MUM/2024
55. ASHA HIMMAT BHADRA vs DCIT CIRCLE 32(1) ITA No. 2154/MUM/2024
56. RAJENDRA KUMAR MUNDRA (HUF) vs National Faceless Assessment Centre ITA No. 1000/MUM/2024
57. VARSHABEN LAHERIKANT BHADRA vs ITO 25(3)(1) ITA No. 1665/MUM/2024 FURTHER RELIANCE IS PLACED ON VARIOUS JUDGMENT WHERE ADDITION MADE ON THE BASIS OF THIRD PARTY STATEMENTS HAVE BEEN DELETED:-
A. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. B. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence.
C. Hon'ble Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows:
a. "The tribunal found that the chain of transaction entered into by the assesse have been proved, accounted for, documented and supported by evidence. The assesse produced before the Commissioner of Income Tax(Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assesse through bank."
RELIANCE IS ALSO PLACED ON FOLLOWING JUDICIAL PRECEDENTS:-
(a) ITO 31(2)(2) vs.Kalpana M Ruia ITA 4130 and 4131/M/2015(Mum-Trib)
(b) CIT vs. Pinakin L Shah (ITA 3380 of 2010 dated 18-01-2012)(Bom)
(c) Smita P Patil Vs. ACIT-CC-1 (ITA Nos. 1407, 1408 & 1409/PN/2012)
(d) Arvind Asmal Mehta vs. ITO (ITA No.2799/Mum/2015)(Mum-Trib)
(e) Smt. Sarita Devi vs. ITO (ITA No.1228/Hyd/2016)(Hyd-Trib) THE LD. AO HAVE NOTHING ON RECORD TO SUGGEST THAT:-
(a) Traded Shares (Scrips) were not listed on stock exchange.
(b) Traded Shares (Scrips) are of bogus companies.
(c) Demat /Bank account not in the name of assesse or do not exist.
(d) Enquiry with Depository Participant ie NSDL/CDSL As share is purchased and sold through Stock Exchange.
D. ASSESSMENT IS COMPLETED ON SUSPICION, WHIMS, ASSUMPTION AND SURMISES, WITHOUT PROVIDING COPIES OF MATERIAL RELIED UPON, WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE PERSON WHOSE STATEMENT RELIED UPON IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND LIABLE TO BE ANULLED:
Page 25 of 56i. The evidences discussed in the order give rise to suspicion only and does not indicate and support the finding arrived at by the learned Assessing Officer. The learned Assessing Officer is working on probability which has no legs and not supported by any cogent material in his possession Suspicion howsoever may be strong cannot take place of evidence. No doubt this may lead to some kind of suspicion in the mind of the Assessing Officer but the Assessing Officer should have made proper enquiry and bring cogent material on record to support and justify his stand before making addition to the total income of the respondent. The assessment cannot be made on the basis of whims, suspicion, assumption and surmises. The addition made to the total income of the respondent has to be supported by documentary evidences Thus the learned Assessing Officer is wrong in arriving at the conclusion that the respondent has manipulated the transactions in connivance with MrAnil Agarwal and M/s Comfort Fincorp to evade the taxes on his unaccounted income. The learned Assessing Officer should have made proper enquiry and establish beyond doubt that transactions made by the respondent is nothing but accommodation entries.
ii. It is submitted that the respondent has not been provided with any material on the basis of which observation is made that respondent have obtained accommodation entries. The respondentclaim that there is no such material in possession of the Assessing Officer which support such observation. This observation is made on the basis of suspicion, assumption and surmises.
iii. During the course of assessment the respondent produced copies of contract notes in support of long term capital gains earned by him. She has also produced copies of bank statement to justify that all payments/receipts are made by account payee cheques as per provisions of Income Tax Act. Thus the respondent has complied with provisions of the Act and produced prime and vital document which is in his possession to substantiate the long term capital gain and to rebut that these are not in the nature of accommodation entries.
iv. It is submitted that the learned Assessing Officer failed to collect and bring on record the evidences from MrAnil B Agarwal which was later retracted back by him. If at all said evidences are collected, copies of same have not been provided to the respondent before using the same against the respondent. The evidences which are collected back of the respondent and not provided copies thereof or not confronted with should not be admitted as evidence while framing assessment.
v. The learned Assessing Officer in assessment order relied upon statement of Shri Anil B Agarwal. According to him in said statement Shri Mr Anil B Agarwal has certified that he was indulged in providing accommodation entries but has not mentioned names of persons to whom he has provided the said entries.
vi. The learned Assessing Officer failed to provide copy of said statement and list of beneficiaries of accommodation entries to verify whether name of the respondent is included in said list or not. In absence of copy of statement and list of beneficiaries the respondent could not verify the correctness of said observation of Assessing Officer and the respondent could not rebut his allegation.
vii. The respondentsubmits that without providing copies of statement and list of beneficiaries on which assessment is based upon is against the principle of natural justice and said assessment kindly be annulled.Page 26 of 56
On the facts and circumstances of case and in law, Ld Assessing officer erred in not providing cross examination to verify transaction The Ld AO erred in passing assessment orderwithout providing opportunity to rebut the material relied by him during the reassessment proceedings examination which is against the principal of natural justice and hence the said orderis liable to be quashed • The assessing officer did not disclose to the assesse what information had been supplied by DGIT Investigation Wing.
• The assessing officer did not give any opportunity to the assesses to rebut the material furnished.
• The assessing officer did not consider any materials that the assesses wanted to produce in support of the case.
• The fundamental principles of natural justice have been violated.
RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS / JUDICIAL PRONOUNCEMENTS FOR ADDITIONS DELETED WHICH WERE MERELY BASED ON INFORMATION NOT DISCLOSED TO THE ASSESSE IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE The Ld. AO have relied on statement made by Mr Anil B Agarwal. However, this statement has not been supplied to the respondent and hence this is in violation of fundamental rules of justice. This has also been upheld by various judicial pronouncements. Reliance is placed on following:
SN Case Citation Observation/ Held
1. M/S ANDAMAN Not allowing the assesse to cross-examine the
TIMBER INDUSTRIES witnesses by the Adjudicating Authority though
V/s CCE CIVIL APPEAL the statements of those witnesses were made the
NO. 4228 OF 2006 basis of the impugned order is a serious flaw
which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assesse was adversely affected
2. Lalchand Bhagat Assessment made without disclosing to the AmbicaDav V/s CIT (37 assesse the information supplied by the ITR 28)(SC) department and without giving any opportunity to the assesse to rebate the information is violation of fundamental rules of justice.
3. DHAKESWARI COTTON An assessment so made without disclosing to the MILLS LTD. v. CIT assesse the information supplied by the [1954] 26 ITR 777 departmental representative and without giving any opportunity to the assesse to rebut the information so supplied and declining to take into consideration all materials which the assesse wanted to produce in support of case constituted a violation of the fundamental rules of justice and called for interference on our part.
4. SETH GURUMUKH The Tribunal violated certain fundamental rules of SINGH v. CIT [1944] 12 justice in reaching its conclusions. Firstly, it did ITR 393 not disclose to the assesse what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assesse to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assesse wanted to Page 27 of 56 produce in support of its case. The result was that the assesse had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, was based on surmises, suspicions and conjectures.
5. Jai Karan Sharma v/s It is a fundamental principle of natural justice that DCIT [2012] 23 no material should be relied upon against a party taxmann.com 300 without giving him an opportunity of explaining (Delhi) the same
6. Hamish Engineering Whether since statements recorded from three Industries (P.) Ltd. V/s parties on which Assessing Officer relied for DCIT [2009] 120 ITD purpose of assessment, had not been provided to 166 (MUM. Trib.) assesse, order of Assessing Officer was bad in law to that extent - Held, yes
7. KishinchandChellaram ITO, on the basis of letters from bank manager, v/s CIT [1980] 4 not shown to assesse, treated amount so remitted Taxman 29 (SC)- as income from undisclosed sources--Tribunal, relying on letters of bank manager, upheld ITO's action--Whether tribunal justified--Held, on facts, no.
8. C Vasantlal& Co. vs. It was open to an income tax officer to collect CIT [1962] 45 ITR 206 materials to facilitate assessment even by private (SC) enquiry. But if he desires to use materials so collected, the assesse must be informed of the materials and must be given an adequate opportunity of explaining it.
Suspicious cannot take place the evidence
1. DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No. 6727/M/2012 dt.20/8/2014
2. K.P. Varghese v. ITO, (1981) 131 ITR 579 (SC);
3. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC);
4. CIT v. Calcutta Discount Co. Ltd.', (1973) 91 ITR 8 (SC);
5. Umacharan Shaw & Bros v. CIT', (1959) 37 ITR 271 (SC Income assessed without evidence is bad-in-law. Income assessed by revenue without supporting material is not justified.
1. CIT V. BHUVANENDRA 303 ITR 235 (MAD.)
2. VINOD SOLANKI VS. UOI (233) ELT 157 (S.C.)
3. CIT V. KASHIRAM TEXTILE MILLS (P) LTD [2006]284 ITR 61 (GUJ)-
4. SARASWATHI OIL TRADERS V. CIT [2000] 254 ITR 259 (SC) Income cannot be assessed on mere statement basis. For assessment there has to be some evidence.
Income cannot be assessed on mere retracted statement If not material to prove
1. Meghraj Jain V. UOI (Bombay High Court)
2. KailashbenManharlalChokshi v. CIT [2008] 174 Taxman 466 (Guj.)
3. M. Narayanan & Bros. v. Asstt. CIT [2011] 201 Taxman 207 (Mag.)
4. Bansal High Carbons (P)Ltd. 2009) 223 CTR 179 (Del).
5. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H)
6. CIT vs. K. Bhuvanendra and others (2008) 303 ITR 235 (Mad.)
7. Abid Malik Vs UOI, (2009TIOL272HC Del-FEMA)
8. CIT vs. Uttamchand Jain 320 ITR 554 (Bom),
9. Srinivas Naik (2009)117 ITD 201 (Bang) Addition cannot be made on assumption basis. There must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law.
Page 28 of 561. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC)
2. CIT v. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC)
3. Omar Salay Mohamed Sait V/s CIT 1959 37 ITR 151 (SC)
4. DhirajlalGirdharilal V/s CIT (26 ITR 734) (SC)
5. Dr. Anita Sahai V/s DIT (266 ITR 597) (All)
6. MODI Creations Pvt. Ltd. V/s ITO [2011] 13 taxmann.com 114 (Delhi)-It will have to be kept in mind that section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assesse. This burden, which is placed on the assesse, shifts as soon as the assesse establishes the authenticity of transactions as executed between the assesse and its creditors.
7. CIT- IV v. Shree Rama Multi Tech Ltd [2013] 34 taxmann.com 32 (Gujarat):-Expenditure cannot be disallowed on account of 'bogus purchase' only on basis of assumption and presumption
8. View taken in Modi creation Pvt. Ltd. Is also taken in following decision.
i. CIT v/s Divine Leasing & Finance Ltd. 158 Taxmann 440 (Delhi) (2007).
ii. Nemichand Kothari V/s CIT (136 Taxman 216) (Gau.) (2004). iii. CIT V/s Value Capital Services (P) Ltd. 307 ITR 334 (Delhi)(2008).
Thus, the addition made on the basis of bad-assessment order is also bad-in-law and requires to be deleted.
E. CASE LAWS RELIED BY LD. AO DISTINGUISHED
1. The Ld. AO in para 12.5pg no 28 of assessment order has laid reliance on Mc Dowell and Co. Ltd. Vs. CTO 154 ITR 148 which is distinguished as under:-
SR. MC DOWELL AND CO. LTD. CASE OF ASSESSEE NO.
1. "Tax planning may be legitimate The fact remains that the assessee has provided it is within the duly placed on record the relevant framework of law. Colourable contract notes, share certificate(s), devices cannot be part of tax detailed corroborative documentary planning and it is wrong to evidence indicating purchase / sale of encourage or entertain the belief shares through registered brokers by that it is honourable to avoid the banking channel, demat statements payment of tax by resorting to etc., The Ld. AO's only case as per its dubious method. It is obligation pleadings and unanimously conclusion of every citizen to pay the taxes that there is very strong circumstantial honestly without resorting to evidence against theassessee suggesting subterfuges." bogus LTCG accommodation entries. I find that there is not even a single case which could pin-point any making against the assessee which could be taken as a revenue nexus.
2. The Ld. AO in para 12.4pg no 27 of assessment order has laid reliance on following case law as under and the same has been distinguished: -
Sr. SumatiDayal Vs. CIT (1995) Case of Assessee No. 214 ITR 801 (SC) "the principle of human We discuss the modus operandi, probabilities and applying it in that preponderance of probability and human case, held that whether apparent is behavior as laid down by Ld. AO. It can be real is to be decided on the basis of noted that the AO has rejected all evidences incriminating circumstances. The filed by the assessee by referring to 'Modus supreme court even took note of the Operandi" of persons for earning long term scheme of converting black money capital gains which is exempt from Income Page 29 of 56 into white through the route of tax under section 10(38) of the Act. All these lottery winnings ete by stating that observations are general in nature and are "In this context it would be relevant applied across the board to all including the to mention that in order to give assessee. Specific evidences produced by effect to the recommendations of the assessee are not controverted by the the Direct Taxes Enquiry revenue authorities. No evidence collected Committee funder the by the AO from third parties is confronted Chairmanship of Justice K.N, to assessee. No opportunity of cross- Wanchoo, retired Chief Justice of examination of persons, on whose India) the definition of "income" in statements the revenue relies to make the section 2(24) of the Act was addition, it provided to the assessee. The amended with effect from April addition is made based on a general report 61.1972 by the Finance Act, 1972 from the investigation wing. Now the case so as to include within its ambit, laws relied by AO are distinguished by winnings from he lotteries, cross placing reliance on:-The Hon'ble Supreme word puzzles, races including horse Court in the case of Omar Salay races, card games and other games Mohamed Sait v. CIT [1959] 37 ITR 151 of any sort or from, gambling or (SC) wherein it was held that no addition betting of any form or nature can be made on the basis of surmises, whatsoever. The reason underluing suspicion and conjectures. In the case of the said amendment was that CIT v. Daulat Ram Rawatmull [1973] 87 exemption from tax that was ITR 349 (SC) the Hon'ble Supreme Court enjoyed in respect of such winnings held that, the onus to prove that the had provided scope for conversion apparent is not real is on the party who of "black" money into "white" claims it to be so. The burden of proving a income." The apex court concluded transaction to be bogus has to be strictly that "There is no dispute that the discharged by adducing legal evidences, amounts were received by the which would directly prove the fact of appellant from various race clubs bogusness or establish circumstance on the basis of winning tickets unerringly and reasonably raising presented by her. What is disputed interference to that effect. The Hon'ble is that they were really the Supreme Court in the case of Umacharan winnings of the appellant from the Shaw & Bros. v. CIT (1959) [1959] 37 ITR races. This raises the question 271 (SC) held that suspicion however whether the apparent can be strong, cannot take the place of considered as real. As laid down by evidence. Courts of law are bound to go this Court, apparent must be by evidence.
considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities." "
Ground 4 On the facts and circumstances of the case the AO erred in initiating penalty proceedings under section 271(1)(c) of Income Tax Act, 1961.
The Ld. AO erred in initiating penalty under section 271(1)(C) of the Income Tax Act,1961.
HUMBLE PRAYER In view of the aforesaid facts and circumstances of the case and in the interest of justice the respondent humbly requests your Honour to consider the above submission and uphold the order passed by the National Faceless Appeal Centre.Page 30 of 56
5. We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records we noticed that assessee being an individual, declared her income from LTCG from the sale of script of M/s Splash Media & Infra Ltd of Rs. 3,56,92,613/- which was claimed exempt u/s 10(38) of the Act as the father of the assessee had purchased 10,000 shares of the said scrip on 21.12.2009. From the records, we also noticed that the said company i.e M/s Splash Media & Infra Ltd., had issued bonus shares in the ration of 3:1 as a result of which the resultant shares had become 40,000 bonus shares on 30.12.2009. These shares were transferred in the D-mat account of the assessee and further the said company had split the face value of the shares of Rs. 10/- each to the face value of Rs. 1/- each resulting into the total holding of the assessee to 4 lakh shares of the company which the assessee had sold in A.Y 2011-12 on which the assessee had earned LTCG of Rs. 3,56,92,613/-.
6. Subsequently the assessment was reopened and completed by making additions u/s 68 of the Act by treating total sale consideration received as income from other sources. On further appeal, Ld. CIT(A) allowed the claim of the assessee.
7. Now after appreciating the entire facts and circumstances of the present case, we noticed that AO reopened the case of the assessee on the basis of information received from DDIT(Inv) Kolkata to the effect that the assessee had obtained accommodation entries in the form of bogus LTCG and relied upon the statement recorded of one Mr. Anil B Agarwal, wherein he had admitted being a bogus entry provider and had provided bogus LTCG entry.Page 31 of 56
8. After analyzing the entire records, we found that during the year under consideration the assessee had sold shares and booked the LTCG and the summary of which is reproduced herein below:
In Assessment year i.e. A Y 2011-12Assessee sold shares and booked the Long Term capital gain. Summary is given as under. The brief facts of transaction are as under:
Name of scrip: Splash Media & Infra Ltd
PURCHASE
Date Name of Quantity Rate Date of amount Amount Paid to Chq No. Name of
the Script of Shares debited in Comfort Bank
Purchase Comfort Securities Account
Securities Limited
Limited
23/12/2009 Luharuka Media & 10,000 528.10 30.12.2009 10,00,000 218786 Union
Infotech Ltd. 01.01.2010 19,00,000 218787 Bank of
11.01.2010 20,00,000 218789 India
16.01.2010 3,94,250 218790
10,000 - 59,24,2 - -
50
SALE
Date
of Amou
Date
Recei nt
of
pt of Receiv
Amou
Qty Mone ed
nt
of y from
Name of the Rat Shares Recei Name of Chg Net
Date Shar from Comfo
Script e Sold ved in Bank Amt s sale
es Comf rt
our
Sold ort Securi
Bank
Secur ties
Accou
ities Limite
nt
Limit d
ed
12- 14- Union
Splash Media 15,0 83. 12,47, 12,00, 14-01- 1,8 12,45,
01- 01- Bank of
& Infra Ltd. 00 17 523 000 2011 85 638
2011 2011 India
17- 21- Union
Splash Media 3,50 89. 3,12,3 3,60,0 21-01- 3,11,9
01- 01- Bank of 472
& Infra Ltd. 0 25 87 00 2011 15
2011 2011 India
27- 31- Union
Splash Media 81,5 95,35, 60,00, 31-01- 14, 95,21,
01- 117 01- Bank of
& Infra Ltd. 00 573 000 2011 405 168
2011 2011 India
07- 16- Union
Splash Media 1,00, 102 1,02,0 50,00, 17-02- 15, 1,01,8
02- 02- Bank of
& Infra Ltd. 000 .01 1,356 000 2011 410 5,946
2011 2011 India
08- 21- Union
Splash Media 25,0 101 25,29, 5,50,0 22-02- 3,8 25,25,
02- 02- Bank of
& Infra Ltd. 00 .19 725 00 2011 20 905
2011 2011 India
09- 10- Union
Splash Media 1,75, 98. 1,71,5 2,60,0 11-03- 25, 1,71,2
02- 03- Bank of
& Infra Ltd. 000 01 2,330 0,000 2011 909 6,421
2011 2011 India
21- Union
10,00, 21-03-
03- Bank of
000 2011
2011 India
31- Union
9,40,1 06-04-
03- Bank of
10 2011
2011 India
4,00 4,09,7 4,10,5 61, 4,09,1
TOTAL
,000 8,894 0,110 901 6,993
33I T A N o . 1 8 8 5 / M u m / 2 0 2 5
Deepika Anil Agarwal, Mumbai.
PURCHASE
Date Particular Qty Rate Amount
21-12-2009 Total Shares Purchased 10,000 528.63 52,86,281
14-12-2009 Bonus Share 3:1 30,000 - -
Total Shareholding 40,000 132.16 52,86,281
14-07-2010 Shares Split 10:1 4,00,000 13.22 52,86,281
9. Whereas the revenue authorities relied upon the
findings of DDIT(Inv), Mumbai and Kolkata and made the additions.
10. However, the fact remains that the shares in questions were brought by the father of the assessee when the assessee was minor and at the time of purchase the father of the assessee had made payments of full consideration from assessee's bank account and the entire payment was routed through banking channel and in this regard the relevant documents have already been placed on record at paper book page No. 33. The said shares were dematerialized and credited in the assessee's father's D-mat account on the same day i.e 21.12.2009. The Company M/s Splash Media & Infra Ltd (Now known as M/s Luharuka Media & Infra Ltd.) issued bonus shares on 17.11.2009 in the ratio of 3:1 i.e against 10,000 shares the respondent received 30,000 shares totaling to 40,000 shares. Thereafter the company in the year 2010 split the shares from face value of Rs.10 to Rs. 1 and thus the number of shares increased to 4,00,000 and same 34I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
were credited in the respondents D-mat A/c. The Respondent then, through her share broker, sold the Shares after holding for more than a year at the recognized stock exchange and delivered the shares in D-mat form to the stock exchange clearing house and also received the sale consideration from the share broker. The shares were sold through M/s Comfort Securities Ltd. who were registered share brokers of Bombay Stock Exchange and Copies of sale bills issued by M/s Comfort Securities Ltd. is part of the paper book. The said sales consideration duly came in Banking Channel and reflected in the Bank Statement. There is Neither reference of assesse's name in search report nor Department has proved cash trail. The assessee had also submitted copy of D-mat Account wherein the said share inwards and outwards was clearly reflected in Transaction statement issued by M/s Comfort Securities Ltd. The shares were sold through recognised stock exchange on which the respondent had already paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in D-mat form to the stock exchange clearing house and the seller only receives sales consideration from the stock exchange through the share 35I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
broker. Therefore, in this way neither the seller was knowing the purchasers, nor the purchasers were knowing the seller.
11. Thus in the absence of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing. It is important to mention here that there is Neither reference of assesse's name in search report nor Department has proved cash trail. Therefore, in our view, the respondent cannot be said to be a part of the group indulging into rigging of share prices of the script as alleged by the A.O.
12. During the course of assessment proceedings the respondent had submitted following documents to substantiate her claim of long term capital gain which is exempted u/s 10(38) of the Act:-
• Copies of sale bills
• Copy of bank statement
• Copy of demat account
• Copy of contract notes
13. The AO had relied on mere information by Investigation Directorate wing. Also the AO had wrongly claimed in the assessment order that the assessee had income from salary from two companies, whereas in reality during the year under consideration the assessee had only income from 36I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
Capital Gains and other sources. It is pertinent to mention that the assessee sold the shares during the month of January 2011 to March 2011 in the F.Y. 2010-11 from a price range of Rs. 83.17/- to 117/- per share as per the price chart attached at paper book Pg. No. 31. The assessee has purchased the shares through broker from Bombay Stock Exchange and sold at Bombay Stock Exchange through its share brokers. The shares were purchased in D-mat A/c and on sale, the D-mat shares were delivered to the clearing corporation of BSE through its share broker. The AO denied the claim of long-term capital gain on sale of shares under section 10(38) of the Act and made addition of total sale consideration under section 68 of the Act.
14.Since, the shares had been in D-mat form and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced from the bank statement. Thus, possession of the shares was not in doubt at all because same was also reflected in D-mat account. Not only that, the sale of shares was also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and after the sale of shares, the net receipts had been credited to the assessee's bank account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the material facts on record 37I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
were quite evident that it was from the sale of shares. As there was no tangible material brought on record to controvert these transactions, therefore the same cannot be treated as unexplained cash credit to be added under deeming provisions of section 68 of the Act. There was no evidence or any whisper that some unaccounted money had been routed and therefore the addition of sale proceeds were rightly deleted. Thus Ld. CIT(A) has rightly held as under:
"Based on the unique f acts the additions made by the AO in respect of LTCG claimed by the Appellant are not substantiated with any cogent evidences. In view of the above, Ground No.-2 and 3of the appeal is hereby allowed. The sale of shares of M/s Splash Media and Infra Limited (Now Known as Luharuka Media & Infra Limited) is treated as genuine and exemption claimed in respect of long-term capital of Rs. 3,56,92,613/- u/s. 10(38) is allowed. Thus, the addition of the AO towards the said sale proceeds of Rs 4,10,19,922/- is hereby deleted."
15.We also noticed that the Coordinate Benches of ITAT in different cases had dealt with the same scrip / shares of M/s Splash Media & Infra Ltd and had deleted the additions made in those respective appeals, the details of which are herein below:
SR. Citation Observation
NO.
38I T A N o . 1 8 8 5 / M u m / 2 0 2 5
Deepika Anil Agarwal, Mumbai.
1 IN THE INCOME TAX We notice that, in the instant case, the
APPELLATE TRIBUNAL, AO has not established that the
MUMBAI BENCH "F", assessee was involved in price rigging
MUMBAI and further the AO did not find fault
Asst. Commissioner of with any of the documents furnished
Income Tax by the assessee. Hence, the ratio laid
Vs. down in the above said cases by the
Mrs. Rehana Mohammed Ali jurisdictional Hon'ble Bombay High
Gheewala, (Legal heir of Court shall apply to the facts of the Mohammed Ali Ebrahim present case.
Gheewala) Accordingly, we are of the view that ITA Nos. 1487 & the Ld.CIT(A) was justified in 1503/Mum/2024 deleting the addition made by the AO in respect of long term capital gains in the original assessment order and short term capital gains in the reassessment order.
16. In view of the above, the Ld.CIT(A) was justified in deleting the estimated addition of commission expenses.
Accordingly, we confirm the orders passed by the Ld.CIT(A) on the three issues, viz., addition of sale value of M/s. Splash Media & Infra Ltd, and addition of commission expenses on estimated basis in the original assessment proceedings and addition of sale value of M/s. Comfort Intech Ltd., in the reassessment proceedings. In the result, both the appeals of the 39I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
Revenue and the cross objection filed by the assessee are dismissed.
2 IN THE INCOME TAX 6.15 Finally, keeping in the facts and APPELLATE TRIBUNAL, circumstances of the case, we are MUMBAI BENCH "A", inclined to hold that impugned MUMBAI additions are not sustainable in the Mr. Anil Agrawal (HUF) Vs eyes of law. The assessee had DCIT-Central Circle-3(4) discharged the primary onus of I.T.A. Nos.5512- establishing the genuineness of the 5516/Mum/2019 transactions whereas the onus as casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The whole basis of making additions is third-party statement and no opportunity of cross- examination has been provided to the assessee to confront these parties. As against this, the assessee‟s position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. Hence, going by the factual matrix and respectfully following the binding judicial precedents as enumerated in the order, 40I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
the additions made by Ld. AO and confirmed by Ld. CIT(A), are not sustainable in the eyes of law.
Therefore, we are inclined to delete the same. We order so. Consequentially, the addition of estimated commission also stands deleted. Ground Nos. 1, 3 & 4 stands allowed. No argument has been urged with respect to Ground No.2 which is related with fulfillment of requirement of provisions of Sec.153D and therefore, this ground stand dismissed. The appeal stand partly allowed.
7.1 The facts in both these years are pari-materia the same. The assessment for both the year has similarly been framed u/s 143(3) r.w.s. 153A on 29/12/2017. The Long-term gains earned by the assessee on sale of scrip of SMIL have been treated as undisclosed income and added u/s 68.
The Ld. AO has estimated commission of 6% in similar manner. The impugned order has confirmed the order of Ld. AO on similar logic and reasoning. Aggrieved, the assessee is in further appeal before us with identical grounds of appeal.
7.2 Facts being pari-materia the same 41I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
including the fact that assessment for both the year is unabated assessment, our findings as well as adjudication as for AY 2010-11 shall mutatis-mutandis apply to both these year. Resultantly, the appeals for both the year stands partly allowed.
3 IN THE INCOME TAX The assessee was allotted warrants on APPELLATE TRIBUNAL, preferential basis from M/S Comfort Intech Ltd. on 20.05.2008 for Rs.
MUMBAI BENCH "A", 4,77,000/. Shares were issued in lieu MUMBAI of warrants which were listed on Amit H. Patel (HUF) Vs. 21.11.2008 and listed on the exchange same date. Thereafter the shares were DCIT-CC 3(4) split in the ratio of 1:10 on 14.10.2009. ITA Nos.5761, 5762, 5764 Similarly the assessee was allotted & 5765/M/2019 warrants on preferential basis by M/s Splash Media & Infra Ltd. and were converted into shares and listed on the stock exchange on 29.10.2009.
thereafter there was a bonus issue in the ratio of 3:1 followed by shares split in the ratio of 1:10 on 27.07.2010.
Both these shares went up spirally over a short period of time According to the Revenue the said transactions are suspicious and bogus which was revealed during the course of search and seizure action on the assessee. The search team found that these two companies M/s. Comfort Intech Ltd. and M/s. Splash Media & Infra Ltd. which are listed on Bombay Stock Exchange were used for providing accommodation entries of long term capital gain/ short term capital gain.
42I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
Held that:
15. Therefore, respectfully, following the decision of the coordinate bench of the Tribunal, we hold that the long term capital gain on the sale of shares of M/s. Splash Media & Infra Ltd. is not a bogus capital gain as the AO has solely relied on the report of investigation/search team and has not carried out any further verification on the basis of documents furnished by the assessee. Similarly, the position of long term capital gain earned on the sale of shares of M/s. Comfort Intech Ltd. Of Rs.1,34,42,069/- is same as the assessee has filed all the necessary evidences before the AO and AO has failed to carry out any further investigation to prove that the long term capital gain earned by the assessee is bogus and fictitious.
Consequently, theappeal of the assessee succeeds on merit also.
Accordingly, the issue raised in ground No.3 & 4 are allowed.
16. The issue raised in ground No.5 is against the order of Ld. CIT(A) confirming the addition of Rs.46,64,066/- by Ld. CIT(A) as made by the AO under section 69 of the Act towards commission paid on the accommodation entries. Since we have already decided the grounds raising legal as well as merits in favour of the assessee and consequently the addition of Rs.46,64,066/- is also ordered to be deleted as this is consequential one.
Accordingly the ground No.5 is allowed.
17. Accordingly, the appeal of the 43I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
assessee is allowed.
4 IN THE INCOME TAX ........
APPELLATE TRIBUNAL 4. The Assessing Officer recorded the following reasons for reopening of the DELHI BENCH: SMC: NEW assessment u/s 147 of the Act -
DELHI "Information has been received from
Gopal Chand Mundhra Investigation Wing of the Income tax
Department that large scale,
and Sons Vs. ITO, Ward-
manipulation had been done in the
55(5), New Delhi. market price of shares of SPLASH
ITA No. 1375/Del/2019 MEDIA by a group of persons acting as
a syndicate in order to provide entries 5 IN THE INCOME TAX of tax exempt long term capital gains to APPELLATE TRIBUNAL the assessee (beneficiary). According to DELHI BENCH: SMC: NEW the information available, the assessee had traded in the above scrip to the DELHI tune of Rs.2374500/- during the DamyantiMundhra Vs. ITO, financial year 2010-11 and bogus Ward-55(5), New Delhi. LTCG amounting to Rs.2116776 /- had ITA No. 1721/Del/2019 been facilitated to the assessee during the financial year 2010-11. Hence, I 6 IN THE INCOME TAX have reason to believe that the above APPELLATE TRIBUNAL income of Rs. 2116776/- chargeable to DELHI BENCH: SMC: NEW tax has escaped assessment for the asst, year 2011-12, within the meaning DELHI of sec.147 of the Income-tax Act."
Ramdev Mundhra Vs. ITO, Ward-55(5), New Delhi. Held that:
26. Since the assessee succeeds on ITA No. 1722/Del/2019 this legal ground challenging the
7. IN THE INCOME TAX validity of reassessment APPELLATE TRIBUNAL proceedings, the addition on merit is not being adjudicated being DELHI BENCH: SMC: NEW academic in nature. The appeal filed DELHI by the assessee is accordingly Shriya Devi Mundhra Vs. allowed.
ITO, Ward-55(5), New Delhi.
27. In these appeals also identical ITA No. 1523/Del/2019 44I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
8. IN THE INCOME TAX grounds have been taken by the APPELLATE TRIBUNAL respective assessees and in all these cases the approving authorities have DELHI BENCH: SMC: NEW given approval to the reopening of DELHI assessment in a mechanicalmanner Gopal Chand Mundhra Vs. without due application of mind.
Therefore, following the reasons ITO, Ward-55(5), New Delhi.
given in the preceding paragraphs, ITA No. 1524/Del/2019 the reassessment proceedings initiated in the case of these assessees are also held to be not in accordance with the law and are accordingly quashed.
28. In the result, all the five appeals filed by the respective assessees are allowed.
16. Apart from the above reliance is also been placed on the following case laws.
Sr. CITATION OBSERVATION No. 17. In the SUPREME COURT Section 10(38), read with sections 68 and 69, of OF INDIA Principal the Income-tax Act, 1961- Capital gains - Commissioner of Income- Income arising from transfer of long term tax v. Kuntala Mohapatra securities(Illustrations) SLP (CIVIL) DIARY NOS. - Assessment year 2014-15- Assessee filed its 5269 OF 2024 return for relevant year - Subsequently,
pursuant to a survey assessee filed revised return and claimed exemption in respect of long-term capital gains on shares under section 10(38) - Assessing Officer rejected assessee's plea and made additions undersections 68 and 69 by relying on statements from 'entry operators' - On appeal, Commissioner (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax -
45I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
Tribunal upheld Commissioner (Appeal)'s decision, emphasizing assessee's right to correct mistakes and criticized Assessing Officer's reliance on statements from 'entry operators' to support additions under sections 68 and 69 as those statements were recorded in unrelated proceedings before survey on assessee, and assessee was not afforded an opportunity to challenge or cross - examine providers of those statements - On revenue's appeal, High Court confirmed order of Tribunal
- Whether there was no reason to interfere with order passed by High Court and therefore, SLP was to be dismissed - Held, yes [Para 3] [In favour ofassessee]
18. [2015] 54 taxmann.com Section 68 of the Income-tax Act, 1961 - Cash 108 (Bombay) HIGH credit (Share dealings) - Assessment years COURT OF BOMBAY 2003-04 to 2006- 07 - Assesse declared capital Commissioner of Income- gain on sale of shares of two companies - tax-13 v. Shyam R. Pawar* Assessing Officer, observing that transaction DECEMBER 10, 2014 was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assesse to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes [Para 7] [In favor of assesse]
19. [2014] 41 taxmann.com Section 10(38) of the Income-tax Act, 1961 -
118 (Hyderabad - Trib.) IN Capital gains - Exemption of, on transfer of THE ITAT HYDERABAD securities [Genuineness of transactions] - BENCH 'A' Income-tax Assessment year 2006- 07 - Assesse filed its Officer, Ward 2, return declaring long term capital gains on Nizamabad v. Smt. Aarti shares traded in Calcutta Stock Exchange - Mittal* NOVEMBER 6, Since sale transactions took place through 2013 authorized stock exchange and securities transaction tax was paid, assesse claimed 46I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine -
Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assesse having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax - Whether on facts, transactions of purchase and sale of shares were to be regarded as genuine in nature and, therefore, assesses claim was rightly allowed - Held, yes [Para 23] [In favor of assesse]
20. [2017] 77 taxmann.com Section 10(38), read with section 147, of the 260 (Ahmedabad - Trib.) Income-tax Act, 1961 - Capital gains - Income IN THE ITAT AHMEDABAD arising from transfer of long-term securities BENCH 'B' Pratik (Bogus transactions) - Assessment year 2006- Suryakant Shah v. 07 - Assesse purchased 3000 shares of Income-tax Officer, Ward- company 'T' through a stock broker - These 10 (3), Ahmedabad* shares were transferred to assesses demat OCTOBER 21, 2016 account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assesse was one of beneficiary of such accommodation entries - Assessing authorities reopened assessment of assesse - Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assesse, assesses claim of 47I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
exemptions of long-term capital gain on sale of shares could not be denied on basis of submission of said broker - Held, yes [Paras 17 and 18] [In favor of assesse]
21. ACIT vs. Vineet Bogus capital gains from penny stocks: The fact Sureshchandra Agarwal that the Stock Exchanges disclaimed the (ITAT Ahmedabad) ITA No. transaction is irrelevant because purchase and 1442/Ahd/2013 & CO No. sale of shares outside the floor of Stock 209/Ahd/2013 Exchange is not an unlawful activity. Off- Assessment Year : 2005- market transactions are not illegal. It is always 06 possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus
22. Surya Prakash Toshniwal Bogus capital gains from penny stocks: Long-
HUF vs. ITO (ITAT term capital gains claimed exempt u/s 10(38) Kolkata) ITA cannot be treated as bogus unexplained income No.1213/Kol/2016 if the paper work is in order. The fact that the Assessment Year :2005-06 Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assesse is at fault
23. CIT vs. Mukesh S. 10(38)/ 68: Long-term capital gains on sale RatilalMarolia (Bombay of "penny" stocks cannot be treated as bogus & High Court) INCOME TAX unexplained cash credit if the documentation is APPEAL NO. 456 OF 200 7 in order & there is no allegation of 7th September 2011 manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity
24. Smt. Sunita Jain, V/s. The claim of the assesse cannot be denied on Income Tax Officer, the basis of presumption and surmises in Ward10 (3), Ahmedabad respect of penny stock by disregarding the ITA. Nos: 501 & direct evidences on record relating to the 502/AHD/2016 sale/purchase transactions in shares Assessment Year: 2008- supported by broker's contract notes,
09) confirmation of receipt of sale proceeds through regular banking channels and the demat account
25. ITO-24(3)(1) V/s M/s Where assesses broker share transaction was Arvind Kumar Jain HUF bone fide in all respect, merely because share ITA No. 4862/MUM/2014 broker was tainted violating SEBI regulations, Assessment Year: 2005-06 would not make assesses share transactions bogus.
26. Kamla Devi S. Doshi V/s. Bogus penny stocks capital gain: The s. 131 48I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
The Income Tax Officer statement implicating the assesse is not Ward 16(3)(1), I.T.A. sufficient to draw an adverse inference against No.1957/Mum/2015 the assesse when the documentary evidence in Assessment Year: 2006- the form of contract notes, bank statements,
07) STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error
27. Shri Sunil Prakash V/s. S. 68 bogus gains from penny stocks: If the AO ACIT -15(2) relies upon the statement of a third party to I.T.A./6494/Mum/2014, make the addition, he is duty bound to provide Assessment Year: 2005-06 a copy of the statement to the assesse and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68
28. S. 10(38) Bogus long-term gains from penny Pramod Kumar Lodha vs. stocks: The transaction cannot be treated as ITO (ITAT Jaipur) bogus until and unless a finding is given that the shares were acquired by the assesse from the person other than the broker claimed by the assesse. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assesse at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assesse
29. Bogus Capital Gains From Penny Stocks: In Navneet Agarwal vs. ITO order to treat the capital gains from penny (ITAT Kolkata) stocks as bogus, the Dept has to show that there is a scam and that the assesse is part of the scam. The chain of events and the live link of assesses action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assesse. All imp judgements referred 49I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
30. Bogus capital gains from penny stocks: The fact ACIT vs. Vineet that the Stock Exchanges disclaimed the Sureshchandra Agarwal transaction is irrelevant because purchase and (ITAT Ahmedabad) sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off- market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus
31. Bogus Capital gains from penny stocks: Capital Meenu Goel vs. ITO (ITAT gains from penny stocks cannot be assessed as Delhi) unexplained cash credit u/s 68 if the assesse has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated
32. Dipesh Vardhan and others S. 10(38)/68: Bogus Capital Gains from vs DCIT-Central Circle Penny Stocks: The AO has not discharged I.T.A. No.7648, 7649, the onus of controverting the documentary 7650, 7651 and evidences furnished by the assessee and by 7662/Mum/2019 bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities. The whole basis of making additions is third party statement and no opportunity of cross- examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue Para 6 of the order states as follows:-The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee's account during the month of March, 50I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 2009- 10 & 2010-11 which led to investment by the assessee in that entity was also furnished during the course of assessment proceedings. Subsequently, M/s STL got merged with another entity viz. M/s SAL(Sunrise Asian Ltd.) pursuant to scheme of amalgamation u/s 391 to 394 of The Companies Act, 1956. The Scheme was duly approved by Hon'ble Bombay High Court vide order dated 22/03/2013, a copy of which is on record. Consequently, the shares of M/s STL held by the assessee got swapped with the shares of M/s SAL and new shares were allotted to the assessee during June, 2013 pursuant to the approved scheme of amalgamation. M/s SAL is stated to be listed public company Group 'A' shares signifying high trades with high liquidity. The assessee has sold these shares through its stock broker namely M/s Unique Stockbro Private Limited in online platform of the recognised stock exchange during the month of March, 2014. The selling price was in the range of Rs.489/- to Rs.491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was through clearing mechanism of the stock exchange and sale consideration was received through banking channels. The transactions are duly evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 51I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
to July, 2015.The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs.360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed.
17 Although in the order of assessment, the AO had also relied upon the decision in the case of Mc. Dowell and Co. Vs. CTO, 164 ITR 148 but the decision of the said case is different from the facts of the present case as in the case of Mc. Dowell and Co. Vs. CTO, 164 ITR 148. Wherein it was also held as under:
"Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious method. It is obligation of every citizen to pay the taxes honestly without resorting to subterfuges."
18 However, in the case of assessee t he fact remains that the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares 52I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
through registered brokers by banking channel, D-mat statements etc., The AO's only case as per its pleadings and unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus LTCG accommodation entries. We find that there are no circumstances or documents placed on record by the revenue to pin-point with cogent evidence that the assessee has connived with any penny stocks / share to earn long term capital gain thus Ld. CIT(A) had rightly held the sale of shares in question and treated the same as genuine and allowed the exemption u/s 10(38) of the Act.
19. Although the AO had also relied upon the decision in the case of Sumati Vs. CIT 1995 414 ITR 801, wherein it was held as under:
"the principle of human probabilities and applying it in that case, held that whether apparent is real is to be decided on the basis of incriminating circumstances. The supreme court even took note of the scheme of converting black money into white through the route of lottery winnings ete by stating that "In this context it would be relevant to mention that in order to give effect to the recommendations of the Direct Taxes Enquiry Committee funder the Chairmanship of Justice K.N, Wanchoo, retired Chief Justice of India) the definition of "income" in section 2(24) of the Act was amended with effect from April 61.1972 by the Finance Act, 1972 so as to include within its ambit, winnings from the lotteries, cross word puzzles, races including horse races, card games and other games of any sort or from, gambling or betting of any form or nature whatsoever. The reason underluing the said amendment was that exemption from tax that was enjoyed in respect of such winnings had provided scope for conversion of "black" money into "white"
53I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
income." The apex court concluded that "There is no dispute that the amounts were received by the appellant from various race clubs on the basis of winning tickets presented by her. What is disputed is that they were really the winnings of the appellant from the races. This raises the question whether the apparent can be considered as real. As laid down by this Court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities."
20. However as per the facts of the present case, as has been discussed by above, the modus operandi, preponderance of probability and human behavior. It can be noticed that the AO had rejected all evidences filed by the assessee by referring to 'Modus Operandi" of persons for earning long term capital gains which is exempt from Income tax under section 10(38) of the Act. In our view, all these observations are general in nature and are applied across the board to all including the assessee. Specific evidences produced by the assessee were not controverted by the revenue authorities. No evidence collected by the AO from the third parties was confronted to assessee. Even no opportunity of cross- examination of persons, on whose statements the revenue relies to make the addition, was provided to the assessee. Therefore the addition in the present case were made on the general report from the investigation wing. The case laws relied by AO are distinguished by placing reliance on the decision of Hon'ble Supreme Court in the case of Omar 54I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC) wherein it was held that 'no addition can be made on the basis of surmises, suspicion and conjectures'. In the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) the Hon'ble Supreme Court held that, 'the onus to prove that the apparent is not real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising interference to that effect'. The Hon'ble Supreme Court in the case of Umacharan Shaw & Bros. v. CIT (1959) [1959] 37 ITR 271 (SC) held that 'suspicion however strong, cannot take the place of evidence. Courts of law are bound to go by evidence'.
21. Thus in this way the decision in the case of Sumati Vs CIT (supra) is not applicable to the facts of the present case.
22. No new facts or circumstances have been placed on record in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, we see no reasons to interfere into or to deviate from the lawful findings so recorded by Ld. CIT(A). Hence, these grounds raised by the revenue stands dismissed.
55I T A N o . 1 8 8 5 / M u m / 2 0 2 5 Deepika Anil Agarwal, Mumbai.
23. In the result the appeal filed by the revenue stands dismissed.
Order pronounced in the open court on 06.08.2025 Sd/- Sd/-
(GIRISH AGRAWAL) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 06/08/2025 KRK, PS
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. सं बंिधत आयकर आयु / The CIT(A)
4. आयकर आयु (अपील) / Concerned CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण,मु बई/ DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
/ आदे शानुसार BY ORDER, स ािपत ित //True Copy//
1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु बई / ITAT, Mumbai