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TMI Blog2025 (2) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition of Rs. 1,84,396/-which is taxable under section 69 of the Income Tax Act, 1961?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed in appreciating the fact that the company and the broker/other entities were involved in price manipulation in the scrip thereby confirming the investigation of the department that the scrip is utilized by entry operators for providing accommodation entries under the garb of LTCG by manipulating/rigging up the share price?" 4. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that there was huge price jump in the scrip of M/s Shri Shaleen Textile Ltd. without any economic rationale which was an arrangement for converting the unaccounted income of the beneficiaries into legitimate income under the garb of exempt LTCG without paying any taxes and assessee was one such beneficiary?" 5. "Whether on the facts and circumstances of the case and in law the Learned CIT(A) erred in ignoring the direct and circumstantial evidence brought on record by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee is an individual engaged in the business of real estate development projects. For the relevant year, he had filed return declaring total income of Rs. 39,67,320/-.He had also earned Long Term Capital Gains of Rs. 75,08,769/-on sale of scrip named 'M/s. Shree Shaleen Textile Limited' (henceforth 'STL')claimed as exempt under section 10(38) of the Act. The assessee was allotted 10,000 shares of STL through preferential allotment on 11.01.2012. These shares were purchased at Rs. 205/- per share (Rs.10/- face value and a premium of 195/-). Subsequently, bonus shares were issued in the ratio of 1:19 on 23.04.2012. After that the shares held by the appellant stood at 2,00,000 shares (10000 lock in balance + 190000 free balance). Thereafter Rs. 10 face value shares were sub-divided into Rs. 2 per share on 13.03.2013, therefore, the number of shares held by the assessee was 10,00,000 shares. During the year, the assessee sold some of these shares deriving LTCG. 3.1 In the assessment order passed u/s 143(3) of the Act, the AO noted that the Kolkata Investigation Wing had undertaken investigation into 84 penny stocks which identified shares of STL as a penny stock. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of various courts of law including large number of cases involving the same scrip. The assessee contented that AO relied on the mode of acquisition of the shares, unusual rise in the share prices, analysis of the transactions, financial analysis of penny stock companies and the enquires made on the operators of the bogus / paper entities wherein they had admitted that they were not doing any real business. In this regard, the assessee submitted that the shares have been sold by the appellant on the floor of the stock exchange. As a result, it is not possible for him to know the counter party purchasing the shares. It is further stated that even during the search/ survey action conducted by the Directorate of Investigation, Kolkata in the case of the brokers, namely, Pravin Aggarwal (Director - Gateway Financial Services Ltd), Deepak Patwari (Controller of Destiny Securities Ltd) etc., they had never stated the name of the assessee in their statements. Further, it is stated that their statements had not been provided to him. The Assessing Officer has merely acted upon presumption and has acted against the natural justice towards the appellant. The AO has mentioned that fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of shares could not be doubted. Further, the appellant submitted a list of judicial decisions of the jurisdictional Tribunal and other Tribunals where the company i.e., STL was involved and the allegation was that the gain/loss from the said scrip was bogus. However, considering the documentary evidence, the Hon'ble Tribunals (including the Hon'ble Jurisdictional Tribunal) have held that impugned additions were not sustainable and has decided the issue in favour of the appellant. It was noted that the decisions in the cases of DCIT vs. Shri Dilip B. Jiwrajka [ITA 2349/Mum/2021; order dated 29.11.2022] and Mrs. Pratibha S. Mhatre vs. ITPO [ITA 695/Mum/2018; order dated 11.06.2021], involve LTCG is arising out of same scrip (STL) as that of the assessee. On similar facts and circumstances, the Hon'ble jurisdictional ITAT has decided the issue in favour of the assessee. These decisions having a binding force on the CIT(A), following the above-mentioned decisions of the jurisdictional ITAT and other decisions of the jurisdictional tribunal, he deleted the addition made. 5. Before us, the ld.DR vehemently argued relying on the findings and the decision of the AO. Per contra, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18; order dated 25.02.2022) (Ahmedabad Trib)), Rashmiben P. kanuog vs. ITO ITA 2131/Ahd/2018; order dated 28.02.2022)) Chandra Prakash Jhunjhunwala vs. DCIT [ITA No.2351/Kol /2017; order dated 09.08.2019), Nicholson Vanijya Pvt. Ltd vs. ITO (L.T.A. No. 1856/Kol/2018; order dated 08.03.2019]. 5.2 Further, hon'ble Jurisdictional Bombay High Court rendered favourable decisions on similar facts in the cases of PCIT v. Indravadan Jain, HUF [Income Tax Appeal No. 454 of 2018),Shyam R. Pawar (229 Taxman 256), CIT vs Jamnadevi Agrawal 328 ITR 656 (Bombay),CIT v. Mukesh Ratilal Marolia [IT Appeal No. 456 (Bom.) of 2007, dated 7-9-2011].It is also stated that various tribunals including Jurisdictional Tribunal granted relief to the assessee on same facts in the cases of Balkrihsna Gajanan Thopte vs. DCIT [ITA 3380/Mum/2019](ITAT, Mumbai) order dated 10.01.2024b) Shri Rakesh Shantilal Shah vs. Ito [ITA 1775/Mum/2019]c) Smt. Geeta Khare vs. ACIT [ITA 4267/Mum/2018] d) Shri Narendra Kumar Saraogi vs. DCIT [ ITA 46 & 47/ Kol/2018]Aditya Vikram Sureka HUF vs. I.T.O [ITA No. 1650/Kol/2018]Shree Shreyans Chopra vs. ACIT | ITA 661/Kol/2018]Smt. Amrita Baid vs. I.T.O. (ITA No. 2477/Kol/2017)Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f April, 2013 to Sep, 2013] at the Bombay Stock Exchange (BSE) at an average price of Rs 62.03 (approx.) to various entities for a total sale of Rs. 2,30,79,975/-. The AO discussed financial details of the M/s. Shaleen Textile from page 4 to page 9; and according to him, price was rigged [which his states at page no. 9 to page no. 15 of assessment order] and thereafter discuses about exit providers from page no. 16 to page no. 19 of the assessment order and he concluded that the financials of M/s. Shaleen Textile was weak; and that the assessee was allotted preferential shares of M/s. Shaleen; and according to AO, the process of preferential allotment of shares were pre-arranged and managed to facilitate beneficiaries like assessee in the form of bogus LTCG through rigging of the BSE and with active connivance of various entry operators who have confirmed that shares of M/s. Shaleen Textile have been used for providing bogus accommodation entry in the form of LTCG/STCG. And such modus- operandi has been confirmed by various exit providers who had stated that they have purchased shares of M/s. Shaleen Textile to provide bogus accommodation entry of LTCG/STCG. 4. The aforesaid acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We find that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of racket manipulating share transactions in the stock exchange i.e., it was not proved that the assessee/or his broker has carried out the transactions of purchase and sale of shares in connivance with the person/entities which were involved in the alleged manipulation/rigging of prices of shares. The Ld A.R also brought to our notice that the regulator of stock market SEBI has not found any wrongdoing on the part of assessee or his broker. 6. In the statement recorded from the assessee on 16.12.2016, he has stated that he was guided by his advisors in making the investment. Further, he has also stated that he was a regular investor in shares for last 5 years and the AO noted that assessee's son is a commerce graduate. Hence it cannot be said that the assessee was completely unaware of share market transactions. We find that the assessee has 7. Further, the shares have entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also note that the issue of denying exemption u/s 10(38) of the Act in respect of shares of Shri Shaleen Textile Ltd came up before this Tribunal in several cases, and Tribunal allowed assessee's LTCG claim and exemption u/s 10(38) of the Act. Few cases are (i) Mrs Pratibha S. Mhatre Vs ITO (ITA. No.695/Mum/2018 order dated 11.06.2021) (ii) Smt Meera Alpesh Kanugo Vs. ITO [ITA. No. 2130/Ahd/2018; order dated 25.02.2022] (Ahmedabad Trib) (iii) Smt Rashmiben P. Kanuog Vs. ITO [ITA No. 2131/Ahd/2018; order dated 28.02.2022] and in the case of DCIT Vs. Shri Dilip B. Jiwrajka [ITA. No.2349/Mum/2021; order dated 29.11.2022] (Mum). 9............ 10. The Ld. AR had rightly relied upon the judgment of the Hon'ble jurisdictional Bombay High Court in the case of Shyam R. Pawar (229 Taxman 256). In the decided case also, the assessee was purchasing and selling the shares through a broker in Mumbai, for purchase of shares of (i) M/s. Bolton Properties Ltd., (ii) M/s Prime Capital and (iii) M/s. Mantra; and he has transacted through the broker at Calcutta and two operators namely Mr. Sushil Purohit and Shri A.Y. 2014-15 Jagdish Purohit, and one of them was the Director of M/s. Bolt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rima facie evidence, the purchases of shares have been contemporaneously entered into the books of account of the assessee. 10.2 The assessee has been declaring agricultural income in his returns of income for the assessment years from 1990-91 to 2001-02. The total agricultural income returned by the assessee up to the assessment year 1999- 2000 was at Rs. 7,57,883. The amount invested in the purchase of shares as on 31-3-1999 was Rs. 4,48,160. The cash available with the assessee by way of agricultural income was much higher than the investment made by the assessee in the purchase of shares as on 31-3-1999. After making the investments in the shares, the assessee had a surplus cash balance of Rs. 3,09,000 as on 1-4-1999. Thereafter, the assessee has further returned an agricultural income of Rs. 66,000 for the assessment year 2000-01. The amount invested in the purchase of shares in the year ending on 31-3-2000 was Rs. 2,57,020. Again the assessee had a cash balance thereof of Rs. 1,18,771. Therefore, it is, very clear that the investment made by the assessee in shares during the previous periods relevant to the assessment years 1999- 2000 and 2000-01 was supported by cash gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties, the Assessing Officer has made a mistake of accepting irrelevant statements and rejecting relevant statements. During the relevant period in which the assessee transacted in shares, persons like Radha Ashok and Sandeep D. Shah were not carrying on their business of brokers as in the manner they carried on the business in the past. Even their Stock Exchange Memberships were cancelled. It was Shri Satish Mandovara who was carrying on the business mainly for and on behalf of Shri Mangesh Chokshi, Director of M/s. Richmond Securities Pvt. Ltd. Those two persons have categorically admitted before the assessing authority that they had dealings with the assessee in respect of the share transactions. They have confirmed the transactions stated by the assessee that he had with them. These positive statements made before the assessing authority supported the case of the assessee. There is no force in the action of the assessing authority in relying on the negative statements of the other parties whose role during the relevant period was either irrelevant or insignificant. Therefore, in the facts and circumstances of the case, it is, our considered view that certain statements relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, copies of bills thereof, photocopies of share certificates etc., were found. The purchase and sale of shares were also found recorded in the books of account. The department has no case that the survey was a staged enactment. A survey is always unexpected. So, it is not possible to presume that the assessee had collected certain fabricated documents and kept at his business premises so as to hoodwink the survey party to lead them to believe that the assessee had entered into share transactions. At least such an inference is not possible in law. The department has no defence against the forcible argument of the learned counsel that the survey conducted by the department has out and out upheld the contention of the assessee that he had purchased and sold shares. We find that this solitary evidence collected in the course of survey is sufficient to endorse the bona fides of the share transactions made by the assessee." 12. On further appeal, it is noted that the Hon'ble Bombay High Court in their order in ITA No. 456 of 2007 dated 07-09-2011 has affirmed the order of this Tribunal. 13. The Ld. AR of the appellant has rightly relied on another judgment of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Sumati Dayal [1995] 214 ITR 801 is wholly misplaced. In that case, the assessee therein had claimed income from horse races and the finding of fact recorded was that the assessee therein had not participated in races, but purchased winning tickets after the race with the unaccounted money. In the present case, the documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the assessee's. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts. 16. For all the aforesaid reasons, we hold that the decision of the Tribunal is based on findings of fact. No substantial question of law arises from the order of the Tribunal. Accordingly, all these appeals are dismissed. No order as to costs." 14. The Ld. AR also brought to our notice the recent judgment rendered by the Hon'ble jurisdictional Bombay High Court in the case of PCIT v. Ziauddin A Siddique (ITA No. 2012 of 2017) dated 04.03.2022 which is found to be relevant in the facts involved in the present case. In the decided case, the issue before the Hon'ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly of the binding jurisdictional High Court in the cases of Shyam Pawar (supra), Ziauddin A Siddique (supra), Mukesh R Marolia (supra) & Jamna Devi Agarwal (supra), we concur with the view of the Ld. CIT(A) and uphold the impugned order of the Ld. CIT(A) deleting the addition of Rs. 2,30,79,975/- & Rs. 4,61,600/-. And we direct the AO to allow the LTCG/exemption claimed by assessee u/s 10(38) of the Act on sale of shares of M/s Shaleen Textile Ltd." 7. As discussed in foregoing paras, it is apparent that the issue in hand is squarely covered both on facts and on law by the co-ordinate bench decision(supra) in assessee's own case in the previous assessment year. The hon'ble Bench has affirmed the decision of the ld.CIT(A) taking into account the contents of the assessment order, the investigation report, the findings of the appellate order and a catena of judicial decisions involving the same penny stock wherein similar additions made by resorting to section 68 of the Act, have been deleted on the ground that the assessee's discharged the primary onus. We do not find any reason for drawing any divergent view of the matter and in the light of the doctrine of judicial discipline ..... X X X X Extracts X X X X X X X X Extracts X X X X
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