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TMI Blog2024 (11) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... i, CIT DR ORDER PER S.RIFAUR RAHMAN,AM: 1. These appeals are filed by the assessee against the separate orders of ld. Commissioner of Income-tax Appeals-30, New Delhi (hereinafter referred to Ld. CIT (A) ) dated 27.07.2018 22.09.2022 for AYs 2014- 14 2016-17 respectively. 2. Since the issues are common and appeals are inter-connected, the same are being disposed off by this common order. We are taking ITA No.5419/Del/2018 for Assessment Year 2014-15 as lead case. 3. Brief facts of the case are, assessee filed her return of income for AY 2014-15 on 28.07.2014 declaring taxable income of Rs. 16,47,870/-. The case was selected for limited scrutiny under CASS. Accordingly, notices u/s 143 (2) and 142(1) of the Income-tax Act, 1961 (for short the Act ) were issued and served on the assessee. In response, ld.AR of the assessee attended the proceedings from time to time and submitted relevant information as called for. 4. During assessment proceedings, the AO observed that assessee has earned capital gain amounting to Rs. 1,11,95,949/- from sale of shares of M/s. Trinity Tradelink Ltd. and M/s. CCL International Ltd.. Relevant chart of calculation of long term capital gain and short term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) erred in sustaining the action of the Ld AO ignoring that additions were made without bringing on record any legally admissible evidence. 6. That the Ld CIT(A) erred in sustaining the action of the Ld AO without appreciating that by filing legally admissible evidence as much as contract note, DEMAT A/ c, payment of SIT, appellant had discharged the burden cast upon it under the Act. 7. That the impugned assessment order is arbitrary, illegal, bad in law and the violation of rudimentary principle of contemporary jurisprudence. 7. At the time of hearing, ld. AR for the assessee briefly submitted the facts of the case and submitted detailed written submissions, which is reproduced below for the sake of brevity :- Re: Passing of the assessment order: The assessee, for substantiating the transaction, duly submitted (a) bank statement (b) Contract notes, (c) transaction account statement with the registered broker namely M/s K.K Securities Ltd. The assessee duly complied with the notices issue and during the course of assessment proceeding and her statement was also recorded. The Ld. AO however, merely reproducing the price movement of the said scrips and placing reliance and quoting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition in this case. From the mode and manner in which the Ld. AO has concluded the reassessment proceedings, shall make it clear that the same is merely based on surmises and conjectures, without conducting any independent inquiry, without bringing on record any evidence against the assessee, against the principles of natural justice, in violation of the settled legal jurisprudence and merely and only following the alleged report. The Ld. AO has made the addition of Rs. 61,75,650/- and Rs. 48,19,6001- (total aggregating to Rs. 1,07,25,569/-) which the assessee has claimed as exempt under section 10(38). RE: CIT (A): Against the aforesaid assessment order, the assessee filed an appeal to the CIT(A) contending the addition on merits. Beside the same, the assessee challenged the reopening as bad in law and further on the ground has erred in the law in invoking the provision of section 147 instead of section 153C of the Act since in the case, it was reopened on the basis of the information received during search and seizure operation conducted upon M/s Dutta and Tyagi other broker. The Ld. CIT(A) without considering the submissions of the appellant, without pointing out any defects in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was recycled. It may the case that the share price of the aforesaid scrips could be subject matter of artificial price rigging, but there is no evidence brought on record by the Ld. AO that either the assessee or his stock broker was involved in connived transactions in order to earn the exempt long term capital gains. The entire exercise of reopening and the consequential re-assessment had been made by the Id. AO only out of pure surmise and conjecture. The assessee has got only incidental benefit of price rise. The assessee invested in shares, which gave rise to capital gains in a short period, does not mean that the transaction is bogus, as all the documents and evidences have been produced before assessing officer. The shares were sold on different dates through recognized stock exchange at quoted price. Reliance in this regard is placed on the decision of Pr. CIT vs. Sandipkumar Parsottambhai Patel [2023] 150 taxmann.com 192 (Gujarat). 3. RELIANCE PLACED ON THE ALLEGED INVESTIGATION REPORT IS BAD IN LAW/ CRYPTIC: A perusal of the assessment order clearly shows that the Assessing officer was carried away by the report of the Investigation Wing. It can be seen that the entire as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind of nexus if any run by some brokers. The assessee on being duly advised by his brother-in-law viz. Mr. Shobit Gupta, invested in the aforesaid scrips and when the price was on a higher side he sold the shares. The assessee is only an investor and is not at all connected with the management of the company. There is nothing unusual about it. It shall be appreciated that the startling spike in the share price and other factors may be enough to 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 behaviour and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Revenue. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss-examination of such person whose statement has been recorded of these persons is required to be given. In this case, the assessee has not been provided any cross-examination. 7. THE ADDITION MADE IN THIS CASE IS AGAINST THE SETTLED JURISPRUDENCE AS ENUMERATED IN VARIOUS CASE LAWS RELIED AND ENCLOSED BY THE APPELLANT: In this regard, kind attention of this Hon'ble Bench is invited to the copies of the case laws which has been enclosed by the appellant from S.no. 1 to 12 in the paper-book. In the said compilation, the appellant has placed copies of six judgements on the issue under consideration of various High Courts and six judgements of this Hon'ble Tribunal on the issue under consideration. The ratio of these case laws are as under: 7. 1 When no direct link/nexus is established of the assessee and or its broker to say that the assessee is involved in some illegitimate operation no addition can be made; 7.2 When the Ld. AO is not able to point out any deficiency/defects in the document submitted no addition can be made in its case; 7.3 All the relevant documents/statements are required to be provided to the assessee for his perusal and counter comments and in the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer observed that assessee had made huge profit out of this investment because of this, it makes the script as suspicious and penny stock. We cannot agree to the above observation, merely because of huge profit, it does not make the script a penny stock. Further, it is fact on record that the financials of the company are not commensurate with the purchase and sale price in the market. The assessee has purchased the shares directly from the company and through share transfer from other party, subsequently, sold the same in the stock exchange. However, there is no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as an investor who has entered in investment fray to make quick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it is dismissed with no order as to costs. 10. Further, the Hon ble Delhi High Court in the case of Pr. CIT v. Smt Krishna Devi in ITA 125/2020 dated 15.01.2021 held as under: - 8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns ITA 125/2020 and connected matters Page 10 of 10 on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 15. Accordingly, the present appeals are dismissed. 11. Therefore, we respectfully follow the ratio of the above decisions. In this case also, the Assessing Officer and Ld. CIT(A) has applied the concept of Human probabilities and held the above said scrips to be a penny stock without bring on re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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