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TMI Blog2025 (2) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... ember And Shri Prabhash Shankar, Accountant Member For the Appellant : Ms. Ridisha Jain / Shri Karan Jain For the Respondent : Shri Himanshu Joshi (Sr. DR) ORDER PER BENCH :- The above captioned appeals have been filed by the assessee as well as the Revenue against the orders of even dates as passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as "CIT(A)"] pertaining to assessment order passed u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment Years [A.Y.] 2014-15 and 2015-16. Since the issues are common and interlinked, these appeals are taken up together for adjudication vide this composite order for the sake of brevity. ITA No.261 and 262/MUM/2024(A.Y. 2015-16&2014-15) 2. The assessee in above appeals has filed as many as five grounds of appeal which are linked and interrelated. 3. In the ground no.1, it has contested the action taken by the Revenue u/s 147 of the Act, by claiming that the proceedings were initiated only on the basis of information from Investigation wing. However, in the course of appeal before us, the learned Counsel has not pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id persons. Addition was also made on account of commission on the said transaction u/s 69C of the Act. In the subsequent appeal, the NFAC upheld the addition. 7.1 It is noticed that the AO made the above addition based on an investigation report of Investigation Wing of Kolkata. It was found that the above LTCG has been derived in respect of certain Penny Stocks companies. The said scrips were purchased on off-market transactions or in preferential allotments or through certain individuals or companies. It is stated that the Investigation wing of Kolkata and Ahmedabad after detailed analysis of data of various such penny stock companies found certain players involved in these dubious roles. He has discussed the findings of the Investigation wing in various paras of the assessment order which discusses the modus operandi involving multiple players indulging in price rigging of penny stock by way of off market or preferential allotments with a holding period of one year and ultimately resulting in long term capital gains or loss. Above mentioned shares were also traded in connivance with such players and the income was disclosed in pre-arranged manner. Detailed analysis of transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tainted .The Assessing Officer had culled out proximate facts in each of the case, took into consideration the surrounding circumstances which came to light after the investigation , assessed the conduct of the appellant by recording statement issuing summon, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion . For all the above reasons, he held that the alleged transactions were obviously made for tax evasion, therefore, such transactions were not genuine but pre-conceived resulting in creation of bogus claim and, therefore, are sham transactions. Accordingly, he concluded that AO's decision of invoking provision of section 68 of the I.T Act was justified in absence of satisfactory explanation on the part of the appellant. Accordingly, he concurred with the conclusion drawn by the AO that the alleged LTCG for sale of preference shares as bogus and was not eligible to exemption u/s 10(38) of the I.T Act and the addition by invoking provision of section 68 of the I.T Act was confirmed. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of purchase of shares 16/02/2012 21/01/2012 e) Mode of Purchase Preferential Allotment Off-market purchase made from Acute Consultancy Ltd f) Mode of payment for purchase A/c payee cheque. A/c payee cheque. g) Sale Consideration Rs. 4,12,33,296/- Rs. 5,04,24,577/- h) Date of sales 03/04/2013 to 10/06/2013 10/07/2013 to 01/10/2013 i) Mode of Sales Online platform of Bombay Stock Exchange Online platform of Bombay Stock Exchange j) Mode of receipt of sale consideration RTGS received RTGS received k) Period of Holding of shares by the assessee 13-17 months. 30-32 months. l) Long Term Capital Gain Rs. 8,86,57,873/- 10.3 It is submitted that the assessee, in order to justify the genuineness of purchase and sale of shares, furnished the understated document on record :- a) Copy of allotment of share and receipt of purchase money and share transfer forms thereof. b) Copy of Bank statement evidencing of having payment made; c) Copy of D-mat statement. d) Copy of contract-cum-bills in support of sale of shares made on floor of Bombay Stock Exchange; e) Copy of Bank statements highlighting the receipt of sale consideration from the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of purchase bill, payment receipt, bank statement, share certificates, D-mat statement during the course of assessment proceedings and are placed on assessment record and correctness of such documents had not been doubted by the AO. The assessee had disclosed the investment in such shares in balance sheets of earlier years and such share investments had been accepted as genuine in earlier years. In support of assessee's contention, he relies on direct judicial decisions of Hon'ble Jurisdictional High Court and Hon'ble ITAT, wherein it is decided that off-market purchase of shares is not an illegal activity and would not disprove the genuineness of transactions, as under:- a) CIT vs. SmtJamnadevi Agrawal-20 Taxmann.com 529 (Bom-HC) b) Mukesh R Marolia-88 CCH 27 (SC) c)Shri Yogesh P. Thakkar v. DCIT-ITA-1605/M/2021 dated 03/02/2023 d) Shri Bhikamchand Mutha v. IΙΤΟ - ΙΤΑ - 2562/M/2022 dated 30/01/2023 10.7 It is contented that the Ld. AO doubted the genuineness of sale transaction of shares by holding that the price of shares had substantially increased in short period of time and such is not in consonance to its financial result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment, which had been converted in electronic D-mat mode and sold such shares on floor of BSE at prevailing market price and thereafter had received the sale consideration from SEBI registered stock broker. The Hon'ble Jurisdictional High Court in the case of CIT v. Lavanya Land Pvt. Ltd (83 Taxmann.com 161) had decided that the addition cannot be made solely on the basis of 3rd parties statement. 10.9 It is further stated that in any case, neither the copies of contrary material, statements of 3rd parties nor opportunity of cross examination had been allowed to the assessee and accordingly would not hold any adverse bearing on the assessee. On this premise the assessee relies on judicial decisions of Hon'ble Apex Court and High Courts, wherein it is held that statements of 3rd parties cannot be held as admissible evidence unless copies are provided and opportunity of cross examination is provided to the suffering party, as under :- a) Andaman Timber Industries v. Comm. of Central Excise - Civil Appeal No.4288/2006), b) CIT v. Sunita Dhadda-ITA-197/2012 (SC), c) KishandchandChellaram vs. CIT-125 ITR 713 (SC), d) Sunil Aggarwal-64 taxmann.com 107 (Del-HC) 10.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.13 It further brought to Hon'ble Bench's notice that the assessee's case is squarely covered by the decision of Hon'ble Jurisdictional ITAT in the case of assessee's own family members case tabulated as under: Sr. No. Assessee Name (Relation) A.Y. ITA No 1 Shailesh Jain HUF (Brother's HUF) 2014-15 6068/Mum/2019 2 Krutika Rajendra Jain (Niece) 2015-16 7064/Mum/2019 3 Alpa Rajendra Jain (Brother's Wife) 2014-15 1922/MUM/2023 wherein on identical facts the Hon'ble Mumbai ITAT allowed the appeals of the assessee in toto by treating the LTCG earned in the scrip M/s Pine Animation which was purchased off market as genuine and also allowed exemption claimed u/s 10(38) of the IT Act 1961 and directed the Ld AO to delete the addition made. Since the issue is covered by the decision of Hon'ble Jurisdictional ITAT in assessee's family members case, it is requested to the AO may be directed to follow the ratio of the higher authority judgement and oblige. 10.14 Therefore, in view of the above the facts and circumstances of the case, the assessee submitted that the decisions of the jurisdictional Hon'ble High Court and co-ordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO. This proves that the Ld AO has accepted that purchases made as genuine, since it is out of assessee's accounted funds. The assessee had furnished the copies of allotment application, allotment advice, bank statement, D-mat statement during the course of assessment proceedings and are placed on assessment record and correctness of such documents had not been doubted by the AO. The assessee had disclosed the investment in such shares in balance sheets of earlier years and such share investments had been accepted as genuine in earlier years. In support of assessee's contention, he relies on direct judicial decisions of Hon'ble Jurisdictional High Court and Hon'ble ITAT, wherein it is decided that off-market purchase of shares is not an illegal activity and would not disprove the genuineness of transactions. 11. We have duly considered the facts of the case, the contents of the assessment order, detailed submissions of the assessee as also various case laws. We also find that the co-ordinate benches of ITAT, Mumbai have in several cases considered similar cases of addition of LTCG arising out of Investigation wing Kolkata report in such shares. Very recently, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing of initial order by SEBI, which has been later revoked. Hence, we are of the view that the transactions of purchase and sale of shares of M/s. Pine Animation Ltd., by the assessee would not be affected by the above said orders of the SEBI. 12. In the statement recorded from the assessee, she has stated that she was guided by her husband in making the investment, who is a Chartered Accountant by profession. The AO has also recorded statement from her husband, but did not find any adverse feature in the statements given by both the parties. We also notice that - a) the assessee has purchased these shares by paying consideration through banking channels. b) the shares of M/s. Pine Animation Ltd., have been purchased from an existing share holder in the off market. The copy of physical share certificate is given, wherein the name of the assessee has been to have been endorsed. c) the shares have been later dematerialised and kept in the Demat account. d) the assessee has sold the shares through stock exchange platform e) the assessee has received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed. 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt. Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr. Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the said broker. However, the evidences furnished by the assessee with regard to purchase and sale of shares were not doubted. Under these set of facts, the Hon'ble Bombay High Court held as under:- "....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange.. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Dematinstruction slips and also received payment from Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in the present cases as well since the assessee has not established that the assessee had rigged the prices and also AO did not find any fault in the documents filed by the assessee. Moreover, purchase of shares in earlier years were accepted as genuine. Shares were traded on online platform of the Stock Exchange. Therefore, sale transactions could not be doubted. 13. In another case of Alka Dilip Doshi in ITA No.1837/Mum/2023 dated 20.02.2024 the assessee sold shares of Sunrise Asian Ltd. The tribunal has taken note of various decisions of Ahmedabad Bench of ITAT in several cases as per para 14 of the order where investment in shares of Sunrise Asian Ltd was held to be without any doubt. Accordingly, based on decisions as reproduced in other cases referred above, the LTCG was held to be genuine and the addition u/s 68 was deleted. 14. In another case of Manju Hiralal Baina in ITA No. 1026/Mum/2020 dated 15.4.2024, the same bench presided by the hon'ble President has considered similar issue at length and deleted similar addition u/s 68 of the Act. 15. Reference could also be made of the decision in the case of Shailesh Jain HUF in ITA No.6068/M/2019 dated 16.02.2021 in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee finds support from the decision of Hon'ble Apex Court in Omar Salay Sait vs CIT (1959) 37 ITR 151(SC). The Hon'ble Apex Court in the case of Umacharan Saw and Bros. vs CIT 37 ITR 271 has held that suspicion how so far strong could not take the character of legal evidence. Thus, it was noted that none of the parties alleged by the Revenue such as broker, operator, directors, exit providers etc whose statements were recorded by the Directorate of Investigation, Kolkata stated name of the appellant. The case of the assessee is supported by a catena of decisions as in the cases of Kunal Dedhia in ITA No.3893/M/2019 dated 31.07.2020, Vijayarattan Balkrishhna Mitta in ITA No.3429/M/2019 dated 1.10.2019, Mukesh Sharma in ITA no.6249/M/2018 dated 29.05.2019 etc. 16. Considering the above discussion, the facts on record and the legal position emerging out of catena of decisions of Hon'ble Supreme Court, jurisdictional High Court and direct decisions rendered by the co-ordinate benches of Mumbai, ITAT order, we hold that the addition made by the AO u/s 68 of the Act in both the years under consideration are devoid of any merit. The claim of the assessee u/s 10(38) of the Act has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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