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TMI Blog2024 (8) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... PREME COURT] had held that construction that is favourable to the assessee should be adopted. Hence by following this principle, reliance placed by ld.CIT(A) on the decision of Hon'ble Calcutta High Court in Swati Bajaj (supra) does not hold its fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of PS IT. Thus, we delete the addition made u/s 68 towards proceeds of sale of listed shares of PS IT which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the assessee in this respect are allowed. Addition on estimate basis towards commission for arranging alleged artificial capital gains @ 5% is consequential to the addition made towards receipt of sale proceeds of alleged penny stock. Since we have deleted the said addition towards sale proceeds of alleged penny stock in terms of above stated observations and findings, this consequential addition of commission has no foundation to stand. Accordingly, the same is deleted. Grounds taken by the assessee in this respect are allowed. - Shri Pavan Kumar Gadale, Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mode. Subsequently, the shares were sent for dematerialisation (DMAT) and were dematerialised on 30.01.2013. The said company was later on merged with the other company that is, Parag Shilpa Investment Ltd on 13.08.2013 under the scheme of amalgamation as per the order of the Hon ble High Court of Bombay. Name was changed to PS IT. Consequently, assessee received 20,000 shares of PS IT. Assessee sold 9,700 shares between the period from 06.06.2014 to 04.09.2014 in the price range of ₹ 500/- per share. Subsequently, shares were split of face value of rupees 10/- each into 10 shares of face value Re.1/- each that is, in the ratio of 1:10. Thus, assessee received 1,03,000 shares of face value of Re.1/- each on 05.09.2014. Out of these shares, assessee sold 61,000 shares during the year up to 31.03.2015 on the platform of Bombay Stock Exchange (BSE) through SEBI registered broker. This entire factual metrics is presented by the chart reproduced below: 3.2. Case of the assessee was taken up for assessment on the basis of investigation by the DDIT (Inv.), Kolkata. In the course of assessment, Ld. Assessing Officer called for details and explanations in respect of the transaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares sold by the assessee which has been investigated by the Investigation Wing of the Department to establish that cash has been routed from various accounts to provide accommodation to the assessee and that assessee had failed to discharge his bonus to prove the unusual rise and fall of share prices. Ld. Assessing Officer placed heavy reliance on the statement of one Mr Agarwal to hold that it is only a colourful device where the apparent is not the real. Assessing Officer also relied on the doctrine of preponderance of human probability to hold that the assessee is indulged in bogus and dubious share transactions since he had not been able to adduce cogent evidences in this regard. Ld. Assessing Officer also noted that assessee did not produce the purchasers of the shares sold by him. 4.3. It is worth noting that before drawing adverse conclusion, ld. Assessing Officer took note of the fact of submissions made by the assessee for which he stated in para 5 as This Long Term Capital Gain is shown as received in your return of income. During the course of assessment you have furnished purchase bill of shares, bank statements, Demat statements and some broker notes to strengthen y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case. 7. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp jump in the share prices of the aforesaid scrip is not justified. He has relied upon the search and survey operations conducted by the investigation wing of the Department at various locations in respect of alleged penny stock which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market regulator SEBI for the relevant period which establishes the tainted status of the scrip involved in the present case, so as to hold the share sale transactions as bogus/accommodation entry as alleged by the ld. AO. It is important to note that the operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Further, sale proceeds are received through the stock market process into the pre-identified bank account of the seller i.e., the assessee which cannot be tainted as unexplained or unaccounted or undisclosed money for the addition made u/s. 68 by the ld. Assessing Officer. 8.1. Section 68 of the Act essentially requires the assessee to explain the nature and source of the sum credited in his books of account to the satisfaction of the ld. Assessing Officer. Time and again, Hon ble Courts have held the requirement of establishing the identity and creditworthiness of the party and genuineness of the transaction to meet the said requirements of section 68. In the present set of facts, as already stated above, operations and modus op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r accepted off-line mode by making payment through banking channel. b. dematerialized the shares purchased by credit to the DMAT account and part of it were later sold out of the holding. c. sold the shares on the platform of recognised stock exchange on the then prevailing prices. d. received the sale proceeds through stock market process in his bank account. 10.1. From the above, we note that ld. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless. 10.2. Ld. Assessing Officer, while drawing the adverse conclusion noted about the cash trail in the accounts of entry providers. He based his conclusion on the finding of investigations done by the Investigation Wing rather than bringing on record any direct and cogent material to establish existence of such a cash trail where the assessee has transacted in cash. In this respect, in the absence of any corroborative material brought on record by the authorities below, we hold against drawing such inference or presumption. 11. We also note that ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through banking channels and even Security Transaction Tax ( STT ) has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs. ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: Where shares were purchased by assessee on floor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere are conflicting decisions of various High Courts on the same issue, the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that construction that is favourable to the assessee should be adopted. Hence by following this principle, reliance placed by ld.CIT(A) on the decision of Hon'ble Calcutta High Court in Swati Bajaj (supra) does not hold its fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of PS IT. 15. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as discussion and observations made herein above, we delete the addition made u/s 68 towards proceeds of sale of listed shares of PS IT which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the assessee in this respect are allowed. 16. Addition made by the ld. Assessing Officer on estimate basis towards commission for arranging alleged artificial capital gains @ 5% amounting to Rs. 5,06,923/- is consequential to the addition made t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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