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TMI Blog2023 (12) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... g of shares by the respondent assessee, arrived at a finding that the Long Term Capital Gain earned by the assessee is not a significant amount and therefore, held that the assessee cannot be said to have taken an accommodation entry by entering into transaction of shares in the penny stock company.
No error in the finding of facts and the conclusion arrived at by the Tribunal that the investment made by the assessee was longstanding and genuine and was not the penny stock company on the basis of which the Long Term Capital Gain was wrongly claimed. No substantial question of law. X X X X Extracts X X X X X X X X Extracts X X X X ..... case and in law, the Ld. Tribunal has erred in deleting the disallowance of commission of Rs. 10,426/- purportedly incurred by the Assessee towards payment to brokers who allegedly entered into the share transactions at the behest of the Assessee overlooking the fact that the entire transaction was stage managed with the object to facilitate the Assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Gains of Rs. 3,47,564/- and claim bogus exemption?" (vii) Whether on the facts and in the circumstance of the case and in law, the Ld. Tribunal was justified in holding the sham transactions of the Assessee as genuine simply on the ground that the shares were held by the Assessee, as an investor for a period of seven/eight years and overlooking the investigation carried out by the Income Tax Department?" (viii) "Whether on the facts and in the circumstance of the case and in law, the Ld. Tribunal was justified in holding the sham transactions of the Assessee as genuine and not appreciating that the Assessee has entered into pre-arranged scheme of share trading to take intended accommodation entry of bogus exempted Long Term Capital Gain wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation Directorate, made addition under Section 68 of the Act to the tune of Rs. 3,47,564/- observing that the assessee was entitled as one of the beneficiaries and that the share price of the penny stock company had arisen from Rs. 100 in December 2008 top Rs. 1000/- in November 2010 and dipped to Rs. 50/- in May 2012. The Assessing Officer observed that from the financial of the penny stocks company during for the relevant period did not show any substantial change so as to support such a huge deviation of the price. It was also observed by the Assessing Officer that the penny stocks company did not have any business activity which justified the huge market price of the shares and purchase and sale transactions of the penny stock company were concentrated within a few persons and the exist providers did not have creditworthiness. The respondent assessee submitted before the Assessing Officer that the transaction was done through broker and STT was paid by the assessee through broker and banking channel, but the said contention was rejected by the Assessing Officer. [5] Being aggrieved, similar additions were also made by the Assessing Officer in the case of Damodar Jajoo fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the CIT(A), the assessee preferred appeals before the Tribunal. The Tribunal, by common order, allowed the three appeals relying upon the decision of this Court in the case of Jagat Pravinbhai Sarabhai reported in [2022] (142) taxmann.com 247. Considering the facts of the case that the respondent - assessee had purchased 12000 shares of penny stock company on 31st March 2003 from IC Baid & Co. at a price of Rs. 6.91 approximately when the concept of STT was not introduced and Demat was not popular. In March 2006, there were only 538 depository participants registered with the Securities and Exchange Board of India and sold the shares in the penny stock company during the Financial Year 2010-11 on 29th July 2010 after holding the same for more seven years and claim of Rs. 3,47,564/- as Long Term Capital Gain. The Tribunal, therefore, arrived at a finding that this fact clearly shows that the assessee is a genuine investor as he was holding the shares for more than seven years and does not involve in taking accommodation entry in penny stock. The Tribunal has also taken into consideration the decision of the Calcutta High Court in the case of Swati Bajaj and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 which in our opinion is a proper conclusion and in the absence of any satisfactory explanation by the assessee, the Assessing Officers were bound to make addition under Section 68 of the Act...." Our analysis in respect of assessee's facts: In the assessee's case under consideration, the assessee's proximity of the time between the buy and sale of shares are as follows: (i) In case of assessee's appeal in ITA No.183/SRT/2021: Assessee sold the shares after seven years. (ii) In case of assessee's appeal in ITA No.184/SRT/2021: Assessee sold the shares after eight years. (iii) In case of assessee's appeal in ITA No.185/SRT/2021: Assessee sold the shares after seven years. Hence the proximity of the time between the buy and sale of shares in case of these assessee's ranges between 7 Years to 8 Years. It is not the case that assessee took the accommodation entry in penny stock, within a period of two or three months to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Appellate Tribunal is ex-facie perverse because the Appellate tribunal deleted the addition of Rs. 2,10,474/- made on account of bogus long term capital gain, without appreciating the entire gamut of fact that the assessee transacted in penny stock namely M/s. Devika Proteins Ltd. thus earning bogus Long term Capital Gain and claiming it to be exempt under section 10(38) of the Income Tax Act?" 3. The assessee filed the return of income for the assessment year 2011-12 on 29.3.2012 declaring his total income Rs. 3,11,490/-. Subsequently the assessment was reopened as information was received that assessee has indulged into script of shell company and had claimed long term capital gain on sale of shares of Devika Proteins Limited to the tune of Rs. 2,10,474/- and that the amount was claimed as exemption under Section 10(38) of the Income Tax Act, 1961 (hereafter referred to as 'the Act') 3.1 The Assessing Officer made addition of the said amount. The entire transaction was treated as bogus and in the nature of penny stock. By adding Rs. 2,10,474/- under Section 68 of the Act, total income was assessed at Rs. 5,21,964/-. 3.2 In appeal by the assessee before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor for a period of seven/ eight years. The investment was made in the year 2003 and sold in 2010-11. The shares were retained for more than seven years and were sold after such long time. These circumstances suggest that the investment was not bogus. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short time." [10] The Tribunal, therefore, after considering the decision of the Bombay High Court in the case of CIT vs. Thana Electricity Supply Ltd reported in 1994 [206] ITR 727 (Bom) binding the judgement of this Court being a judgement of the jurisdictional High Court, allowed the appeal filed by the respondent assessee. [11] Heard learned Senior Standing Counsel Mr. Nikunt Raval for the appellant Revenue and learned advocate Mr. Hardik Vora on caveat for the respondent - assessee. [12] Considering the finding of facts arrived at by the Tribunal that the respondent assessee has sold shares after seven years and therefore, the proximity of time between the buy and sale of shares cannot be considered as an accommodation entry in penny stock company within a short period of about one year to book bogus of Long ..... X X X X Extracts X X X X X X X X Extracts X X X X
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