ACME AUTO (P) LTD,NEW DELHI V. ACIT, CENTRAL CIRCLE-3,NEW DELHI, NEW DELHI

ITA 1271/DEL/2024

AI Insights

M/s Acme Auto (P) Ltd. appealed against the orders of the Commissioner of Income-tax (Appeals) which upheld the additions made by the Assessing Officer regarding long-term capital gains from the sale of shares of Yamini Investment Company Ltd., alleged to be a penny stock. The Tribunal examined the transactions, including the purchase of shares of M/s Anax Com Trade Ltd., their subsequent merger into Yamini Investment, and the sale of these shares. The Tribunal considered the evidence provided by the assessee, including bank transactions, balance sheets, and MAT payments, and found these transactions to be genuine. The Tribunal also noted that the shares were listed and traded on the stock exchange, and there was no direct evidence linking the assessee to any manipulation of the share prices.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840060 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 20-03-2024
• Other Referred Cases: Sujit Madan vs. DCIT, Jyoti Gupta vs. ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH YADAV
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Unexplained cash credit; Fair market value; Capital Gains; Share purchase agreement; Scheme of amalgamation; Benefit of exemption; Bogus
• Section: 147; 68; 69C

Judgement Text

"P a g e | 1 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA Nos. 1271&1272/Del/2024 (Assessment Years: 2016-17 & 2017-18) M/s Acme Auto (P) Ltd. 408, DLF Tower - A Jasola, New Delhi - 110025 Vs. ACIT Central Circle-3 New Delhi – 110002 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AACCA4888R Appellant .. Respondent Appellant by : Dr. Rakesh Gupta, Adv. Sh. Saksham Agarwal, Adv. Respondent by : Sh. AkhileshYadav, Sr. DR Date of Hearing 09.02.2026 Date of Pronouncement 26.02.2026 O R D E R PER ANUBHAV SHARMA, JM: These appeals preferred by the Assessee against the common orders dated 13.03.2024 of the Ld. Commissioner of Income-tax (Appeals)-23, New Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. Printed from counselvise.com P a g e | 2 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) FAA’ for short) in Appeal Nos. CIT(A), Delhi-23/10884/2015-16 and CIT(A), Delhi23/10401/2016-17arising out of common Assessment Order dated 30.03.2022 dated 30.03.2022 u/s 147 of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’) passed by the ACIT, CC-3, New Delhi for AYs. 2016-17 & 2017-18. 2. At the time of hearing ld. Counsel has submitted that assessee is not pressing ground No. 1 to 3 and the contention were raised in regard to remaining ground by which assessee has challenged the sustenance of addition made by the Assessing Officer by treating the long term capital gains arising out of transaction in the scrip of Yamini Investment Company Ltd. which Assessing officer has alleged to be a penny stock and thereby disallowing benefit of exemption u/s 10(38) of the Act and making addition u/s 68 r.w.s 115BBE of the Act as unexplained cash credit. Further, additions have been made @ 6% on account of alleged commission paid u/s 69C of the Act. The relevant part of the impugned order for AY: 2016-17 from the order of ld. First Appellate Authority is reproduced below which captures the claim of assessee: Printed from counselvise.com P a g e | 3 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) “18. During the course of appellate proceedings, the main arguments of the appellant areas under:- “The appellant got 1,50,000 equity shares of Rs.10 each of M/s Anax Com Trade Ltd. on 31.10.2012 in the F.Y 2012-13 and were duly disclosed in the audited balance sheet of F.Y2012-13, F.Y 2013-14, 2014-15, 2015-16 and payment of which was made through banking channel from the current bank account. These shares were spitted into face value of Rs. 1/- on26.11.2013. The said company M/s Anax Com Trade Ltd. was merged into M/s Yamini Investment Company Ltd. as per Order of Hon'ble Bombay High Court and the said M/s Yamini Investment Company Limited relisted in BSE and after merger. The 15,00,000 shares of Anax Com trade Ltd were converted into 12,00,000 shares of Yamini Investments Co. Ltd. on06.05.2015. The assessee sold 5,00,000 equity shares during the year in which long term capital gain of Rs.1,36,11,010/- was disclosed in the income tax return and claimed to be exempted u/s 10(38). The shares of M/s Yamini Investment Company Ltd. was not a penny stock and that since the date purchase of these shares were lying in the demat account and that MAT tax liability @ 18.5% was paid. It is submitted by the appellant that they did not know M/s Yamini Investment Company Limited when the assessee made investment in the shares of M/s Anax Com trade Limited. To purchase shares offline is not contrary to any rule made by SEBI or any authority. It is not the case of Ld. Assessing Officer that assessee did not make investment in purchase of shares of M/s Anax Com trade Limited. Assesseecompany purchased these shares in the year 2012. It is not understood if M/s YIC was involved in some wrong activities and for any reason was suspended by SEBI then why the same was resumed subsequently? Shares of M/s YICL even as on today are also traded in stock exchange. It is further submitted that no commission or brokerage was paid by the assessee company while making investment in the shares of M/s Anax Com trade Limited as the shares were directly purchased by the assessee from this company which were got dematerialized. Since, the sale of shares was made through stock exchange, brokerage, ST etc. were paid by the assessee which is evident from the contract notes placed in the paper book. The sale consideration was received by the assessee through banking channel only. Assessee was aware that the company M/s Anax Com Trade Limited shall be merged with M/s YICL.Assessee made genuine investment in the shares of M/s Anax Com trade Limited and sold the shares allotted of M/s YICL and the capital gain on the sale of Shares of M/s YICL was duly declared Printed from counselvise.com P a g e | 4 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) by the assessee in its return of income. Thus, to allege that assessee entered into penny stock transaction is just on surmises and in view of the facts, the adverse observation of the Ld. Assessing Officer made as above may kindly be excluded from consideration.” 3. Ld. CIT(A) was not satisfied with explanation and in para 20 to 41 has held as follow: “20. It is seen that apart from investment in Anax Com Trade Limited (Anax) the appellant has not made any investment in other companies except for listed companies and group companies. 21. The trading in shares of Yamini Investment was suspended by the SEBI vide circular dated 29.05.2012 further the trading was resumed in T Group. The Assessing Officer has noted that as at 31.03.2012 the fair market value, book value and EPS of Yamini Investment was Rs.10.93 and Rs.0.01 per share, Thus, It was a penny stock. 22. M/s Yamini Investment or M/s Anax Com trade was not doing any business activity and existed only on paper aimed at manipulating the share market price and convertingblack money into white through capital gains transactions. The share price was manipulated by way of transactions carried out through various operators some of which have been penalized by the SEBI also. 23. The Assessing Officer in his order has discussed the trading pattern in the shares as a result of manipulation of share price. After amalgamation of Anax with the Yamini Investment, the shae prices jumped about thousand times and then suddenly took a dip also. In the impugned manipulation, a small coterie of about 20 companies traded almost 50% of the volume of Yamini Investment. 24. The Assessing Officer has discussed in detail the modus operandi by the appellant in procuring bogus Long Term Capital Gain by the appellant. The issue of violation of SEBI circular number smdrp/Policy/CIT-21-99 dated 14.09.1999 by the broker of the appellant has also been dealt by the Assessing Officer in assessment order. 25. The Assessing Officer concluded that the transaction were sham transaction andaimed at converting unaccounted money into Long Term Capital Gain. Printed from counselvise.com P a g e | 5 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) 26. From the website of SEBI, it is seen that there are three adjudication order regarding violation of various provisions by operators of the share of Yamini. The three order by the adjudicating authority are as under:- Sep 21, 2021 Adjudication order against Sanjay Jain-HUF, Harshita Jain and Ambarnuj Finance and Investments Private Limited in the matter of Yamini Investment Company Limited. Sep 20, 2021 Adjudication order against Rohit Sharma and Anil Bansal in the mater of Yamini Investment Company Limited Jul 31, 2014 Adjudication Order in respect of M/s Yamini Investments Company Limited, Shri Gokul M. Jayakrishna, Shri Munjal M. Jayakrishna, Ms. Shivani R. Jayakrishna, Ms. Padma Jayakrishna, Shri Rajesh Jayakrishna, Ms. Devyani Rajesh Jayakrishna and Shri Narayan Jha, in the matter of M/s Yamini Investments Company Limited. 27. Further, there was order dated 24.09.2023 by the member SEBI regarding price manipulation of Yamini Investment. The price manipulation in the case of M/s. Yamini Investments Co. Ltd. was a subject matter of adjudication by the SEBI. The SEBI has barred 65 entities from markets for two years while directing 27 entities to disgorge unlawful gains worth Rs. 40.23 crore earned by manipulating the share price of Yamini Investment Ltd. The market regulators SEBI also imposed a penalty on two entities. According to SEBI, 102 entitles connected with MadhurBuildconPvt Ltd, one of the promoters of Yamini Investment, traded in the scrip and provided exit at an inflated price to certain shareholders. 28. Further, the regulator barred 65 entities from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner, for two years. 29. The SEBI carried out investigation in the price manipulation of Yamini Investments.The investigation period was divided into two segments - the pre-stock split period (10 September 2013 to 18 February 2015) and the post-stock split period (19 February 2015 to 30 September 2015), SEBI investigated the scrip to determine whether the price movement was due to normal trades or any act of price manipulation. 30. The investigation carried out by the regulator found that from 10 September 2013 to 30 September 2015, there were unusual fluctuations in the price Printed from counselvise.com P a g e | 6 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) and volume of YaminiInvestment. From an analysis of the trading in the scrip on BSE during the Investigation period,SEBI found that certain entities trading in the scrip were allegedly connected based on know-your- customer (KYC), off-market transfers, fund transfers and common directors. 31. As per the order of SEBI, \"The connections have been sought to be established between the noticees and either Yamini Investment itself or with MadhurBuildcon, which is the promoter of Yamini. In cases where the connection is being made between the noticees and Yamini, the link, I note, has been made through their connections with entities connected to Vandana Agarwal, who was a director of both Yamini and Anax Com Trade Ltd (Anax), one of the amalgamating entities. These connections, I note, have primarily been made based on off-market transfers, common address and contact details appearing in KYC documents, and based on having common directors.\" 32. The SCN alleged that atleast 14 entities had manipulated the price of the scrip during the period covered by investigation. The trading pattern in the scrip was analysed during the investigation, and it emerged that during the pre-stock split period (patch I and patch II, which was also the price rise period, nine out of the top-10 buyers and seven out of the top-10 sellers were part of the Madhur group. It was also noted that the 102 entities of the Madhur group had cumulatively bought 57,884 shares during this period, representing 93.03% of the total market volume, and sold 33,629 shares, representing 50.46% of the total market volume. 33. As regards the trading during the post-stock split 19 February 2015 to 30 September 2015), which was also the price fall period, SEBI noted that eight out of the top-10 buyers were part of the Madhur group. When the trading data of the entire group was analysed, it was observed that 102 entities (Madhur group) had cumulatively bought 8,78,83,505 shares, representing 75.46% of the total market buy volume during this period, and sold 1,50,567 shares which amounted to 0.13% of the total market sell volume. Trading by entities of Madhur Group (102 entities) Trading by Madhur Group Trading Among Madhur Group IP Period Gross buy Volume Gr. Buy % to Total Gross Sell Volume Gr. Sell % to total Traded Shares Traded shares % to total market Printed from counselvise.com P a g e | 7 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) market Volume market Volume volume Pre Stock Split 57,884 93.03% 33,629 54.05% 31,391 50.46% Post Stock Split 8,78,83,505 75.40% 1,50,567 0.13% 1,39,221 0.12% 34. The order of SEBI notes that \"It is therefore noted that Madhur group was active on both the buy side and the sell side during the pre-stock split period. During the price fall period, it was noted that Madhur group trades were mostly on the buy side, and sell volumes were negligible when compared to the total market volume. It was also noted that during the price rise phase, 31,391 shares, representing 50.46% of the market volume, were traded between the 102 entities forming the Madhur group,\" 35. The SCalso explained the alleged modus operandi in the price manipulation ofYamini Investment scrip. It says,\"The connected entities of the Madhur group (102 entities)traded in the scrip during the investigation and provided exit at an inflated price to certainshareholders of the company. These shareholders had received shares of Yamini Investment pursuant to a preferential allotment made as part of a scheme of amalgamation sanctioned by the Bombay High Court (HC).\" 36. In terms of the scheme of amalgamation, 2,455 shareholders of the two unlisted companies-Anax and Fidelo Power and Infrastructure Ltd (Fidelo) that merged with Yamini Investment-were allotted eight shares of Yamini for every 10 shares held by them in the respective unlisted companies. 37. Out of these 2,455 entities, SEBI observed that 1,112 entities had sold allottedshares during the investigation period. 38. The order states that \"I also note that out of 102 entities, allegedly part of the Madhur group who had traded in the scrip during the investigation period, only 14 entities are alleged to have manipulated the price of the scrip and further 29 entities who acted as counterparties providing exit to the shareholders (two entities are common -manipulated the price and also provided exit) have been made noticees,\" 39. The SEBI has noted the following Modus Operand of manipulation “The connected entities of the Madhur Group (102 entities) traded in the scrip during the investigation and provided exit at an inflated price to certain shareholders of the Company.These shareholders had received shares of Yamini pursuant to a preferential allotment made as part of a Scheme of Amalgamation sanctioned by the Hon'ble Bombay High Court. In terms of the Scheme of Amalgamation, 2455 shareholders of the two Printed from counselvise.com P a g e | 8 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) unlisted companies - Anax and Fidelo - that merged with Yamini were allotted 8 shares of Yamini for every 10 shares held by them in the respective unlisted companies. Out of these 2455 entities, it was observed that 1112 entities had sold allotted shares during the Investigation Period. However, only 27 preferential allottees (including one entity, Gopal Bansal (HUF), which was allegedly part of the price manipulation also whose connections with the Madhur Group could be established during the investigation, have been made Notices. I also note that out of 102 entities, allegedly part of the Madhur Group who had traded in the scrip during the Investigation Period, only 14 entities are alleged to have manipulated the price of the scrip, and further 29 entities who acted as counterparties providing exit to the shareholders (two entities are common - manipulated the price and also provided exit) have been made Noticees. Apart from the above 67 Notices, a separate SC was issued to two promoter entities for delays in filing certain disclosures and another entity- AamirMemon(Aamir)-for manipulating the price of the scrip during the Investigation Period. I, however, note that the investigation has failed to establish any connection between Aamir and Madhur Group.” 40. From perusal of the above, it is evident that the appellant carried out a prearranged transaction whose sole motive was to artificially generate long term capital gain using the SEBI route. The SEBI has also confirmed that the impugned shares were manipulated. The case of the appellant fails the test of preponderance of human probability also. 41. In view of the above, the addition made by the Assessing Officer is upheld. GroundNo.5 and 6 are dismissed.” 4. The contention of ld. AR is that all the relevant documents were filed in support of all the claim of assessee showing genuineness of transaction which have not been considered and ld. AR has relied Coordinate Bench decision wherein the scrip of Yamini Investment Company Ltd. has been held to be not a penny stock. Printed from counselvise.com P a g e | 9 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) 5. Ld. DR on the contrary has relied the impugned orders of ld. tax authorities below and has submitted that the facts and surrounded circumstances indicate that assessee had acquired shares of M/s AnaxCon Trade Ltd. as part of modus operandi to claim bogus long term capital gain. 6. After taking into consideration the contentions we find that in regard to Ground Nos. 4, 5 & 6, the addition of Rs.1,42,87,050/- was made along with amount of Rs.8,57,223/- @6% of Rs.1,42,87,050/- on the ground that Long Term Capital Gain shown by the assessee was not genuine. In order to establish the genuineness of investment and consequent capital gain, the ld. Counsel has drawn our attention to the evidences in the form of computation of income and acknowledgement of return showing Long Term Capital Gain on sale of shares of M/s Yamini Investment Co. Ltd. and appellant paying MAT @ 18.5%. Thus at outset it certainly becomes questionable that where an assesse has paid MAT @ 18.5 percent then should an assesse’s transaction of claim of LTCG should at all be doubted for possible attempt to falsly claim the LTCG on a penny stock. 7. Then it comes up that appellant had initially purchased 1,50,000/- shares of M/s Anax Com Trade Ltd. in FY 2012-13 which were split/sub Printed from counselvise.com P a g e | 10 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) divided to 15 lac shares and which were duly disclosed in successive balance sheets. Then M/s Anax Com Trade Ltd. was merged into M/s Yamini Investment Co. Ltd. by the order of Hon'bleDeihi High Court and after merger, assessee sold 5,00,000/-equity shares. Assesse has filed at PB 60 a letter dated 12.07.2021, making the submissions to AO, regarding acquisition of 1,50,000/- shares of M/s Anax Com Trade Ltd., division of these shares, disclosure of these shares in balance sheets of successive years, merger of this company to M/s Yamini Investment Co. Ltd. Then at PB 73-74 is submissions dated 19.11.2021 to Ld. AO submitting that these shares were disclosed in the return, and that was assessee dealing in other shares also. PB 153-155, 156-158, 159-160, 162-164 are the copies of balance sheets as on 31.03.2013, 31.03.2014, 31.03.2015 & 31.03.2016 showing these shares in the balance sheets of the assessee. At no stage earlier the investments were doubted. Admittedly payment while investment was made through banking channel and was never doubted as bogus investment for taking accommodation entry. 8. Then at PB 83-84 is the copy of assessee's balance sheet as on 31.03.2013 showing investment of 15,00,000/- shares of M/s Anax Com Printed from counselvise.com P a g e | 11 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) Trade Ltd. and atPB 87 are the submissions of LTCG, transactions through banking channel and that shares were listed on stock exchange even today. Assesse has filed copies of DMAT, cheques, bank statement, share certificate and broker notes. 9. Coming to most contentious aspect where Ld. CIT(A) has referred in his order at pages 5-8 of impugned order, some orders of SEBI & SEBI circular.Ld. Counsel has initially submitted that these orders were never confronted to the assesse. However, more critical is that fact that these orders do not show as to how the impugned transaction of acquiring shares of M/s Anax Com Trade Ltd. in FY 2012-13 or its split, or merger into M/s Yamini Investment Co. Ltd. by the order of Hon'ble Deihi High Court or broker or agencies involved in transaction of assesse was ever a subject matter of SEBI investigation or any adverse orders. Rather the period of these SEBI reports do not correspond with transaction of assessee. 10. Ld. Counsel has placed reliance on decisions in Sujit Madan vs. DCIT bearing ITA No. 3436/2023 dated 20.01.2025 and Jyoti Gupta vs. ACIT bearing ITA No. 2528/2022 dated 06.11.2024, where in, which Long Term Printed from counselvise.com P a g e | 12 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) Capital Gain on the identical shares was the subject matter and which were found genuine. 11. In the light of above we are of considered view that ld. Tax authorities have fallen in error in considering the facts and circumstances peculiar to case of assessee in denying claim of LTCG by doubting the transaction on suspicion of general modus operandi to earn false LTCG. The grounds no. 4 to 6 in ITA 272/del/2024 for AY 2016-17, are sustained. 12. As in ITA 1272/Del/2024, for AY2017-18, the scrip involved is same and there is same set of evidences, the findings for AY 2016-17 apply mutatis mutandis to AY 2017-18 also. 13. The appeals are allowed with consequences to follow the event. Order pronounced in the open court on 26.02.2026 Sd/- (Manish Agarwal) Sd/- (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 26.02.2026 Rohit, Sr. PS Printed from counselvise.com P a g e | 13 ITA Nos. 1271 & 1272/Del/2024 M/s Acme Auto (P) Ltd. (AY: 2016-17 & 2017-18) Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "