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TMI Blog2023 (1) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... mere assumption. To our understanding, the mere assumption, surmises and conjecture cannot the basis of making the addition or treating the transaction in sale of share of impinged company as bogus until and unless it is supported by the material documents. Income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and assumptions of certain facts. In order to hold income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/stock brokers for such an arrangements. In absence of such finding, no adverse inference can be drawn against the assessee. Whether a person who genuinely entered into purchase and sale of particular shares at stock exchange which was rigged up by some other person or group of persons, therefore, he enjoyed the windfall from such action of other person, can he be disallowed the benefit of tax exemption or carry forward of loss ? - To our mind the Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometime we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - only and also claimed carry forward of loss of Rs. 43,54,574/- from the activity of sale and purchase of shares & securities. 3.1. The AO received information from the DDIT(Inv.), unit-6(2) Mumbai that the assessee entered into the trading in penny stock namely the scrip of M/s. Arya Global Shares & Securities Ltd. (formerly known as Kuvam International Fashion Ltd.) and Vax Housing Finance Corp. Ltd. Thus, income escapement proceedings under section 147 of the Act were initiated by the AO. 3.2. The assessee during the re-assessment proceedings submitted that he has entered into the transaction of purchase and sale of scrip of M/s. Arya Global Shares & Securities Ltd. through stock exchange and in the process earned net profit of Rs. 19,310/- only. All the transaction of purchase and sale are duly supported by the bill on which STT has been paid. The profit earned for Rs. 19,310/- was also not claimed as exempted under section 10(32) of the Act. 3.3. The assessee with regard to transaction carried in the scrip of Vax Housing Finance Corp. Ltd. submitted that he incurred loss of Rs. 43,54,574/- only. The assessee claimed that such loss is genuine loss incurred in the ordinary c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills of Kuvam International 44-66 The above paper book has been examined. The veracity of above documents has not been questioned but the A.O. has made out a full case simply because the transactions are in penny stock script. The investigation department has not named the appellant specifically in its report as having been indulged in bogus purchase or sale of impugned shares. The whole emphasis is on penny stock without negating evidential value of independent evidences such as bank statement etc. In my opinion, all the transactions were done through stock exchange and complete details including purchase and sales bills have been submitted which are STT paid. Further no deduction u/s. 10(38) has been claimed. The appellant is regular investor or trader in shares and securities and it is not a case of one big transaction. Under the circumstances, the departmental case is not beyond doubt the decision in the case of Pratik Suryakant Shah v. Income-tax Officer, Ward-10(3), Ahmedabad* is relevant which states as under: Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long-term securities (Bogus transactions) - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The view of the AO was based on certain factors which have been elaborated in the preceding paragraph. However, the ld. CIT-A, subsequently, was pleased to delete the addition/disallowances made by the AO, holding that there was not any adverse material against the assessee. 9.1. From the preceding discussion we note that the entire basis of AO to treat the transaction as bogus was based on the information received from DDIT(Inv.), unit-6(2) Mumbai that the impugned two scrips were penny stock. However, the AO nowhere pointed out any adverse finding in such report against the assessee. We further note that assessee carried out the transaction in impugned scrip namely M/s. Arya Global Shares & Securities Ltd. and Vax Housing Finance Corp. Ltd. at stock exchange through registered broker which was duly supported by the documentary evidences such as bills, Demat account, and bank statements, showing payment were done through banking channel. The AO nowhere found any discrepancies in the documentary evidences. The dominant basis of treating the impugned transaction as bogus was based on assumption of the AO that the impugned scrip was found as penny stock by the DDIT(Inv.), unit-6(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shares & Securities Ltd. and Vax Housing Finance Corp. Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. 9.4. In holding so we draw support and guidance from the judgment of Hon'ble Delhi High court in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80 where it was held as under: 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s. Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 9.5. Respectfully following the judgment of Hon'ble Delhi High Court (Supra), we hold that in absence of any specific finding against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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