DCIT, CENTRAL CIRCLE-17, DELHI, DELHI V. DALIP NAGAR, DELHI

ITA 3303/DEL/2023

AI Insights

The case involves an appeal by the revenue against the order of the Ld. CIT(A) which had deleted the additions made by the AO on account of alleged bogus long-term capital gains and unexplained commission expenditure. The AO had re-opened the assessee's case based on information from the Investigation Wing that the assessee had obtained accommodation entry of long-term capital gain from the sale of shares of a penny stock company. The Tribunal examined the evidence provided by the assessee, including bank statements, contract notes, and demat account statements, and found them to be sufficient to establish the genuineness of the transactions. The Tribunal also noted that the assessee was not provided an opportunity to cross-examine the persons whose statements were relied upon by the AO, which was a violation of the principles of natural justice.

• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Delhi
• Assessment Year: 2017-2018
• Appeal Filed On: 22-11-2023
• Other Referred Cases: Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II, PCIT vs. Hadoti Punj Viikas Ltd., PCIT vs. Anand Kumar Jain, PCIT Vs. Kuntala Mohapatra, PCIT Vs. Anupama Mohapatra, PCIT vs. Parasben Kasturchand Kocher, PCIT v. Renu Aggarwal, PCIT v. Dipansu Mohapatra, PCIT v. Mamta Rajivkumar Agarwal, Principal Commissioner of Income Tax-12 v. Smt. Krishna Devi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDU BALA SAINI
• Assessee Lawyers: K. SAMPATH
• Keywords: Condonation of delay; Question of law; Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Cost of acquisition; Bogus purchase; Gift; Capital Gains; Principle of natural justice; Sham transactions; Accommodation entries; Competent authority; Opportunity of cross examination; Penny stocks; Deduction for capital gain; Bogus
• Section: 147; 148; 142(1); 68; 133(6); 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “B” BENCH: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3303/Del/2023 [Assessment Year : 2017-18] DCIT Central Circle-17, Room No. 244A, 2nd Floor, ARA Centre, E-2, Jhandelwalan, New Delhi- 110055. v s Dalip Nagar, D-18, Geetanjali Enclave, Malviya Nagar, South Delhi, Delhi-110017 PAN:AAIPN5966C APPELLANT RESPONDENT Revenue by Ms. Indubala Saini, Sr. DR Assessee by Shri K. Sampath, Adv. and Shri V. RajKumar, Adv. Date of Hearing 22.01.2026 Date of Pronouncement 25.03.2026 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by revenue against the order dated 18.09.2023 of Ld. Commissioner of Income Tax (A), 27, New Delhi [“Ld. CIT(A)”] in Appeal No. ITBA/APL/M/250/2023- 24/1056195997(1) passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 07.03.2022 passed u/s 147 of the Act for Assessment Year 2017-18. 2. The assessee is an individual and e-filed his return of income on 30.07.2017, declaring total income of INR 1,54,75,260/-. The case of the assessee was re-opened in terms of notice issued u/s 148 dated 28.03.2021. Based on the information received from Printed from counselvise.com ITA No.3303/Del/2023 Page | 2 Investigation Wing, New Delhi that assessee has obtained accommodation entry of long term capital gain of Rs. 93,42,350/- from the sale of shares of Yamini Investment Company Ltd. (YICL) which is a penny stock company and the assessee is held as beneficiary traded in the share of YIML and generate bogus Long term capital Gains (LTCG). Accordingly, notice u/s 148 of the Act was issued on 28.03.2021 after obtaining approval for competent authority. In response the assessee filed return of income on 22.04.2021 declaring total income of Rs. 1,54,75,260/-. A notice u/s 143(2) was issued on 12.06.2021 and, thereafter, various notices were issued along with questionnaire u/s 142(1) from time to time which were duly replied by the assessee. The AO after considering the submissions made and based on the information received from the Investigation Wing, alleged that assessee has obtained fictitious income in the shape of long term capital gain of Rs.87,21,207/- which was treated as unexplained credit u/s 68 of the Act and addition was made. Further addition of Rs. 1,74,424/- was made by holding 2% commission paid for obtaining bogus long term capital gain as unexplained expenditure u/s 69C of the Act. Accordingly, the total income of the assessee was assessed at Rs.2,43,70,890/-. 3. Against the said order, assessee filed appeal before the Ld. CIT(A) who vide impugned order dated 18.09.2023 has deleted the additions and made as unexplained credit u/s 68 of the Act. 4. Aggrieved by the said order, revenue is in appeal before the Tribunal by taking following grounds of appeal: Printed from counselvise.com ITA No.3303/Del/2023 Page | 3 1. “Whether the Ld. CIT(A) has erred in holding that the information received by the AO is not prima facie applicable in the case of the assessee. 2. Whether the Ld. CIT(A) has erred in holding that the fluctuation in price of the shares is a normal phenomenon of the share market as in the case of the scrip in which the assessee has traded, the price defies all logics of a normal and natural financial market. 3. Whether the Ld. CIT(A) has erred in ignoring the detailed analysis of the scrip that is part of the Assessment Order and the Survey Report in the case of the assessee. 4. Whether the Ld. CIT(A) has erred in holding that the capital gain as declared by the assessee is genuine as the assessee has been a beneficiary of the bogus LTCG reaped through dubious mechanism. 5. Whether the Ld. CIT(A) has erred in deleting the commission expenditure, as the then Assessing Officer has clearly mentioned in the Assessment Order that the assessee has received his unaccounted income in the form of LTCG and thus, commission must have been paid by the assessee to the entry provider in such trade. 6. Whether the Ld. CIT(A) has erred in holding that the AO could not bring forward any evidence which can establish the cash trail between the assessee and the broker towards obtaining the LTCG, as the then Assessing Officer has discussed the modus operandi in detail in the Assessment Order and the assessee has been unable to prove the genuineness of the transaction. 7. Whether the Order of the Ld. CIT(A) is erroneous and not tenable in law and on facts. 8. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.” 5. Since all the grounds of appeal are with respect to deletion of addition made by holding the long term capital gain of Rs. 87,21,207/- as bogus accommodation entry and further deletion of addition of Rs. 1,74,424/- towards alleged commission paid as unexplained expenditure u/s 69C for obtaining such gain, therefore, all the grounds are taken together for consideration. Printed from counselvise.com ITA No.3303/Del/2023 Page | 4 6. Before us, Ld. Sr. DR vehemently supported the orders of lower authorities and submits that since the order was not passed u/s 153C of the Act thus there is no question of referring to any incriminating material found as a result of search in support of the additions made. He further submits that the notice u/s 148 was issued after obtaining statutory approval. Ld. Sr DR further submits that the assessee was provided sufficient opportunities to establish the long term capital gain as genuine and all the statements etc. as available with the AO were provided to the assessee. Ld. Sr DR further submits that the AO has referred to the statements of certain entry operators as reproduced in the assessment order, it could be seen that the AO has discussed at length the modus operandi carried out by the entry providers and further the movement of share price of YICL in market and thus hold that the sale of shares of YICL is the sham transactions. In last, Ld. Sr. DR vehemently supported the orders of the AO and stated that surrounding circumstances also leads to believe that transactions declared by the assessee is not the valid transaction, and therefore, it is prayed that the order of the AO be restored. 7. Per contra, Ld. AR for the assessee vehemently supported the order of ld. CIT(A) and based on the investigation report in the case of Praveen Agarwal, the genuine transaction of sale of shares of YICL was treated as sham transaction. The ld. AR submits that the assessee has allotted 2,00,000 Equity shares of Fidelo Power & Instructure Ltd. in February 2012 and payment was made through banking channels. Copies of purchases bills along with copy of the Printed from counselvise.com ITA No.3303/Del/2023 Page | 5 bank statements where the payments against such purchases, were submitted to the AO. As a result of Order number 563 of 2013 of Hon’ble High Court, the company M/s Fidelo Power and Infrastructure Limited was merged with M/s Yamini Investment Company Limited. After the merger, assessee received 16,00,000 equity share in Yamini Investments Company Limited in lieu of 2,00,000 shares of Fidelio Power and Infrastructure Limited out of which assessee has gifted 4,00,000 equity shares to his brother. Thereafter, the said shares were credited to the Demat account of the assessee and part of the shares were sold during the year under appeal through member broker in recognized Stock Exchange on various dates. The necessary copies of the contract notes and the sale bills along with the ledger account of the assessee in the books of broker and the bank statement wherein the credit of sale proceeds was appearing as filed before the AO are placed in the paper book filed before us. The Ld. AR further submits that the AO has based his allegation on the statement of Sh. Raj Kumar Modi however, no opportunity to cross examination of the persons whose statements were relied by AO was provided, even after making specific requests. Ld. AR also submits that all the transactions related to sale and purchases of shares were carried out though proper bill and vouchers and the sales proceed as well as purchased consideration were transacted through banking channels. The Ld. AR submits that not providing the opportunity to cross examination the persons whose statements were relied upon is violation of principle of natural justice. For this, reliance is placed on the judgement of Hon’ble Supreme Court in the case of Andaman Timber Industries v. Printed from counselvise.com ITA No.3303/Del/2023 Page | 6 Commissioner of Central Excise, Kolkata-II reported in [2015] 62 taxmann.com 3 (SC) and in the case of PCIT vs. Hadoti Punj Viikas Ltd. reported in [2023] 157 taxmann.com 193 (SC) and in the case of PCIT vs. Anand Kumar Jain reported [2021] 133 taxmann.com 289 (SC). Ld. AR Further submits that in the case of brother Shri Akshay Nagar to whom shares were gifted by the assessee was also reopened u/s 147 of the Act and the reassessment order was passed where in Long term capital gains declared from the sale of the shares of YICL by was accepted and no addition was made. Ld. AR also placed reliance on the various judgments of the Hon’ble High Courts and Co-ordinate Benches of Tribunal wherein the LTCG from the sale of shares of YICL was held as bogus accommodation entry and were deleted, which are as under: (i) PCIT Vs. Kuntala Mohapatra [2024] 160 taxmann.com 608(SC) and (2024) taxmann.com 567 (Orissa). (ii) PCIT Vs. Anupama Mohapatra, [2024] 161 taxmann.com 703(SC) and (2024) taxmann.com 702(Orissa). (iii) PCIT vs. Parasben Kasturchand Kocher, (2021) 282 Taxmann 301 (SC) 8. Heard the parties and perused the material available on record. The sole issue in this case is with respect to the sale of shares of YICL. and claim of long terms capital gain of Rs.87,21,207/- as exempt u/s 10(38) of the Act which was alleged as bogus accommodation entry by the AO. The AO has solely relied upon report supplied by the Investigation Wing, New Delhi which include the statements of Shri Praveen Agarwal and his trusted persons, recorded during the course of search carried out in his case wherein they had admitted that they have provided accommodation entries of Printed from counselvise.com ITA No.3303/Del/2023 Page | 7 long term capital gain to various beneficiaries and assessee is one of them. 9. We observed that the assessee during the course of assessment proceedings has filed all the plausible evidences and details to establish the genuineness of the purchases and sales of shares of YICL which includes the copy of allotment letter of shares, copies of the bank statements showing relevant entries of payment of purchase consideration through banking channel were also filed before the AO. Besides this, copies of the Demat account statements and copies of all the contract notes and sale invoices regarding sale of shares on various on dates were also filed along with copies of the statements of account of the assessee in the books of broker. Further the assessee filed the copies of the bank statements showing the receipts of sale proceeds. The AO failed to controvert all these evidences filed by the assessee nor any contrary material except the so-called statements, was brought on record to hold these details as invalid. It is further observed that nowhere in the statements recorded of Praveen Agarwal and other, they stated the name of the assessee nor admitted providing any accommodation entry alleged bogus long term capital to the assessee. 10. The Hon’ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise (supra) has held that the cross-examine of the witness is precondition which in the instant case has not been followed. This proposition is reconfirmed by the Hon’ble Supreme Court in the case of PCIT vs. Hadoti Punj Printed from counselvise.com ITA No.3303/Del/2023 Page | 8 Vikas Ltd. The Co-ordinate Bench of Amritsar Tribunal in the case of Rama Mittal vs. ITO (supra) after considering the fact of not providing the opportunity of cross examination held the assessment order as invalid, the relevant observations are as under: “10. It is noted that the assesses has established its claim before the lower authorities, based upon the documents namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. and that the appellant held the shares for a period of more than one year and sold them through recognized stock exchange and paid STT. Meaning thereby that the assesse has complied all the conditions of section 10(38) of Income Tax Act, 1961 to claim, long term capital gain of Rs. 65,01,278/- earned by the appellant was exempt as per provisions of section 10(38) of the Income Tax Act, 1961 and same has been duly declared in the income tax return of the assessee. 11. From the record, it is found that the addition made by the AO and upheld by the CIT(A) was solely based on the premise of alleged price rigging in the YICL Fin Corp script. However, this allegation is negated by the Securities Appellate Tribunal Mumbai, in its order dated August 28, 2023, by explicitly dismissed these allegations. The tribunal's ruling stated that there is no supporting material on record to substantiate the accusation of the company's involvement in price inflation. Moreover, the order emphasized that purchasing shares from the stock exchange platform is not unlawful, and continuous buying of shares at increased prices does not contravene any provisions of SEBI laws, particularly the PFUTP Regulations. (APB, Pgs. 76-88). 12. The Hon'ble SUPREME COURT OF INDIA in the case of Pr. CIT v. Renu Aggarwal (2023) 153 taxmann.com 579/294 Taxman 521/456 ITR 249 (SC), dismissed the SLP filed by revenue filed against the Hon'ble high court where adjudicating the matter on Section 69A, read with section 10(38), of the Income-tax Act, 1961-Unexplained moneys (Share dealings) - High Court by Impugned order held that where Assessing Officer disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were being misused for providing bogus accommodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by Assessing Officer had rightly been deleted - Whether SLP filed by revenue against said impugned order was to be dismissed-Held, yes [Para 2] [In favour of assessee). 13. In the case of Pr. CIT v. Mamta Rajivkumar Agarwal [2023] 155 taxmann.com 549/295 Taxman 512 (Gujarat), the Hon'ble HIGH COURT Printed from counselvise.com ITA No.3303/Del/2023 Page | 9 OF GUJARAT has observed on exemption of capital gains under Section 10(38) of the Income-tax Act, 1961 as under- \"Section 10(38) of the Income-tax Act, 1961-Capital gains Income arising from transfer of long term securities (Share dealings) - Assessment year 2013-14-Assessee had sold shares of SNCFL and earned long-term capital gains Assessing Officer issued a show cause notice alleging that transaction was a penny stock deal aimed at illegitimately claiming long-term capital gain exemption under section 10(38) -Assessing Officer treated purchase as bogus and added it to total income Commissioner (Appeals) examined all relevant documents provided by assessee, including bills of purchases, broker account copies, bills for sales, and bank statements and held that purchases were made through a recognized broker via cheque, establishing their genuineness and, thus, he directed Assessing Officer to delete addition of LTCG claimed as exempt under section 10(38) Tribunal upheld Commissioner (Appeals) decision stating that there was no evidence implicating assessee or broker in any wrongdoing related to SNCFL script - Whether in view of concurrent findings of fact that there was no evidence available on record suggesting that assessee or his broker was involved in rigging up of price of script of SNCFL, addition on account of LTCG claimed as exempt under section 10(38) had rightly been deleted - Held, yes [Paras 4 and 5] [In favour of assessee]\" 14. In another case of Pr. GIT v. Indravadan Jain, HUF [2023] 156 taxmann.com 605/[2024] 463 ITR 711 (Bombay), the Hon'ble HIGH COURT OF BOMBAY held as under- \"Section 68, read with section 10(38), of the Income-tax Act, 1961 Assessment year 2005-06 Assessee had claimed sale proceeds of shares as long-term capital gain (LTCG) exemption - However, Assessing Officer held that scrip was a penny stock and thus, he made addition of same under section 68 -Commissioner (Appeals) observed that shares were purchased on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DEMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange and, accordingly, held that there was no reason to add capital gains as unexplained cash credit under section 68-Whether Tribunal had rightly concluded that there was no merit in appeal against Commissioner (Appeals) order Held, yes [Para 4) [In favour of assessee]\" 15. Recently, the Hon'ble Apex Court in the case of Pr. CIT v. Dipansu Mohapatra [2024] 160 taxmann.com 289/298 Taxman 194/463 ITR 681 (SC) dismissed against order of High Court that where assessee provided all details of purchase and sales of shares to AO along with contract notes for purchase and sale, demat account and bank Printed from counselvise.com ITA No.3303/Del/2023 Page | 10 statement and, furthermore no incriminating materials were found during survey conducted in premises of assessee, AO could not deny claim under section 10(38) merely by relying on statements of accommodation entry providers which were recorded much before date of survey. 16. The Judgement of Hon'ble Kolcutta High Court in the case Pr. CIT v. Swati Bajaj [2022] 139 taxmann.com 352/288 Taxman 403/446 ITR 56 (Calcutta), relied by the department is not applicable to the facts of the present case and same is distinguished as under: (a) In the case of Swati Bajaj, the Script was of that Surabhi Chemicals and Investment Limited for a duration of 17 months whereas in the present case the script was of YICL Fin Corp. Ltd. being for duration of 4 Years. (APB, Pg. 176, Para 7) (b) In the case of Swati Bajaj, Investigation report was Available in public domain and substantiate portion has been reproduced in the order whereas in this case it was neither available nor provided to the appellant. (c) In the case of Swati Bajaj, Survey was conducted on broking entities and the brokers admitted that accommodation entries were provided but in the present case, the assessee has purchased the shares from RELIGARE SECURITIES Ltd. and there was no such survey or admission by the broker. (d) Number of beneficiaries Identified but No such identification provided to assessee (APB, Pg.83 para 9.6) (e) Price Rigging was established that Surabhi Chemical scrip were involved in artificial rigging of price to provide bogus LTCG whereas in the instant case, the order of adjudicating authority of SEBI was challenged before Security Appellate Tribunal Mumbai and it has been held by the Tribunal that buying shares from stock exchange is not a crime and does not violate any provisions of SEBI (APB, Pg 85, para 14) 17. Considering the factual matrix of the case and judicial precedents, we hold that the decision of the Ld. CIT(A) is infirm and perverse to the fact on record. We hold that there was no reason to add capital gains as unexplained cash credit under section 68 of the Act. Accordingly, the addition of Rs. 66,56,020/- is deleted.” 11. The Hon'ble Gujarat High Court in the case of Pr. CIT v. Mamta Rojiv kumar Agarwal reported in [2023] 155 taxmann.com 549 (Gujarat) under identical facts held that the transaction of sale of Printed from counselvise.com ITA No.3303/Del/2023 Page | 11 shares was not a penny stock. The relevant extract of the said decision is cited hereunder for ease of reference: \"3.3 The Tribunal confirmed the findings of the CIT(A) insofar as, it held in favour of the assessee. Findings of the Tribunal indicate that the assumption of the AO that the transaction carried out by the assessee are similar to the modus operandi of penny stock was misplaced. The Tribunal on facts observed thus: \"11.1...On analyzing the facts of the present case, we note that the AO on one hand has alleged that the entire transaction was bogus but on the other hand the AO himself has allowed the cost of acquisition against the sale of shares, meaning thereby, the purchase of the shares has been admitted as genuine. The transactions of purchase and sales go hand in hand. In simple words, sales is not possible without having the purchases. Thus, once purchases has been admitted as genuine, then corresponding sales cannot be doubted until and unless some adverse materials are brought on record. As such, we note that the AO in the present case has taken contradictory stand. On one hand, the AO is treating the entire transaction as sham transaction and on the other hand he's allowing the benefit of the cost of acquisition for the shares while determining the bogus long term capital gain.... 11.2 It was alleged by the AO that the price of the share of M/s Shree Nath Commercial & Finance Ltd., increased in a short period of time which is not in commensurate to the financial performance of the company. The rise in the price of the scripts of a company, having no financial base/ business activity /profitability certainly gives rise to the doubt about such increase in the price. But in our considered view, this cannot be a sole criterion for reaching to the conclusion that the bogus long-term capital gain was generated which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to investigate the matter in detail and the same cannot take the place of the evidence. But in the case on hand, there was no finding that the enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s Shree Nath Commercial & Finance Ltd. Similarly, there was no finding with subsequent market price of the impugned scrip. We also note that there was no dispute raised by the Revenue with respect to the following facts: 1 Shares were purchased through broker on recognized stock exchange. 2. Purchase consideration of share was made through cheque. 3. Share was duly dematerialized in D-mat account. Printed from counselvise.com ITA No.3303/Del/2023 Page | 12 4. Shares were sold through stock exchange after the payment of STT. The transactions have been confirmed by brokers. 5. The payments were received through ECS in the D-mat account. 6. Inflow of shares are reflected in D-mat account. Shares are transferred through D-mat account and buyer are not known to the assessee. 7. There is no evidence that the assessee has paid cash to the buyer or the broker or any other entry provider for booking LTCG and share were purchased by the determined buyer. 4. Hence, the Tribunal held, and in our opinion rightly so that there was no evidence available on record suggesting that the assessee or his broker was involved in rigging up of the price of the script of Mis Shree Nath Commercial & Finance Ltd. The assessee had acted in good faith. The Tribunal, therefore, correctly held that the Assessing Officer had acted only on assumption which was misconceived. The CIT(A) order dismissing the revenue's appeal was confirmed. \" 12. The Hon’ble Supreme Court in the case of PCIT Vs. Genuine Finance Pvt. Ltd. reported in (2024) 162 Taxmann.com 700(SC) has dismissed the SLP filed by the department. The relevant head note reads as under: “Section 28(i)of the Income-tax Act, 1961 - Business loss/deduction - Allowable as (Bogus purchases) - Assessment year 2012-13 - Additions were made to income of assessee on account of bogus loss incurred in penny stock which were deleted by Tribunal - Revenue submitted that order of Tribunal was ex facie erroneous, illegal and perverse because Tribunal deleted additions without appreciating that transaction was pre-arranged as well as sham and was carried out through penny scrip company - However, Tribunal had observed in impugned order that assessee was continuously dealing in share trading of various shares/scrips and said fact was not disputed - Further, Tribunal had observed that scrip of VAS was not black listed by SEBI at relevant point of time - Tribunal had also considered order passed by SEBI and nowhere in said order, scrip of VAS was blacklisted or was penny stock or sham and bogus scrips/shares - Tribunal had also observed that entire transaction of purchase and sale of scrips was through Stock Exchanges, through authorized brokers and payments made to brokers were reflected in bank account - Tribunal had therefore opined that merely on conjecture and surmises, Assessing Officer could not make disallowance - High Court by impugned order held that in view of observations made by Tribunal, issue involved was purely a question of fact, and no question of law, much less, substantial question of law Printed from counselvise.com ITA No.3303/Del/2023 Page | 13 arose for consideration - Whether since there was gross delay of 224 days in filing this special leave petition and reasons assigned for condonation of delay were not sufficient, application seeking condonation of delay was to be dismissed and consequently, special leave petition was to be dismissed - Held, yes [Paras 1 and 2] [In favour of assessee].” 13. Similarly in the case of PCIT Vs. Renu Agarwal reported in (2023) 153 Taxmann.com 579 (SC), the hon’ble Apex court has dismissed the SLP filed by the revenue. 14. The Hon’ble Supreme Court in the case of PCIT Vs. Kuntala Mohapatra (supra) and also in the case of PCIT Vs. Anupama Mohapatra (supra) has dismissed the SLP filed by the revenue and confirmed the order of hon’ble Orrisa High court. 15. Further, the Hon'ble Delhi High Court in the case of Principal Commissioner of Income Tax-12 v. Smt. Krishna Devi reported in [2021] 126 taxmann.com 80 (Delhi) 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 have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 Printed from counselvise.com ITA No.3303/Del/2023 Page | 14 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. 9. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other 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 Printed from counselvise.com ITA No.3303/Del/2023 Page | 15 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 evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that \"There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.\" The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show 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 behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares 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. Printed from counselvise.com ITA No.3303/Del/2023 Page | 16 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.\" 16. It is further observed that the assessee has been able to demonstrate that purchases consideration of was made through banking channel and the sales were made through recognized stock exchange and the necessary copies of the contract notes and sale bills were submitted which were not doubted. Once it is not in dispute that the shares were hold by the assessee in the Demat account for a period of more than one year and were sold through online mode via recognized stock exchange and proceeds were received through banking channel. Thus, without any clinching evidence that such transaction is sham transactions, based on some material found as a result of search or brought on record by making independent enquiries, merely on the basis of general statements of third person that too without providing opportunities of cross examine of such person, no addition could be made by holding the LTCG as bogus. 17. Ld. CIT(A) after appreciating these facts and considering the fact that no addition was made in the case of brother of the assessee to whom assessee has gifted the shares of YICL and were sold by him and long term capital gains was declared and claimed as exempt u/s 10(38) of the Act. Thus, we find no error in the order of Ld. CIT (A) in Printed from counselvise.com ITA No.3303/Del/2023 Page | 17 deleting the additions made by the AO which order is hereby, upheld. All the grounds of appeal of the revenue are thus, dismissed. 18. In the result, appeal of the revenue is dismissed. Order pronounced in the open Court on 25.03.2026. Sd/- Sd/- (ANUBHAV SHARMA) JUDICIAL MEMBER Date:-25.03.2026 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "