ITO-19(3)(1), MUMBAI, MUMBAI V. RAICHAND PARASMAL CHOKSHI, MUMBAI

ITA 1486/MUM/2024

AI Insights

The case involves two appeals by the Income Tax Officer against Raichand Parasmal Chokshi, an individual, and his HUF, concerning the assessment year 2017-18. The appeals challenged the CIT(A)'s decision which had deleted the additions made under section 68 of the Income-tax Act, related to long-term capital gains claimed as exempt under section 10(38) on the sale of shares of Monotype India Ltd., alleged to be a penny stock. The Revenue argued that these transactions were part of a scheme to convert unaccounted money into legitimate income through bogus LTCG. However, the Tribunal found that the assessee had provided sufficient evidence to substantiate the genuineness of the transactions, and the Revenue's reliance on general allegations and the preponderance of probabilities was insufficient to overturn the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126029 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Jamnadevi Agrawal, PCIT v. Krishna Devi, Pr. CIT v. Ziauddin A Siddique, PCIT vs. Indravadan Jain HUF, CIT vs. Shyam R. Pawar, Swati Bajaj & others v. PCIT, Union of India vs Kamalakshi Finance Corporation Ltd, Vegetable Products vs. CIT, Andaman Timber Industries v. CCE
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Unexplained cash credit; Income from undisclosed sources; Cost of acquisition; Onus to prove; Capital Gains; Principle of natural justice; Search and seizure; Accommodation entries; Earning of tax free income; Assessment record; Penny stocks; Bogus
• Section: 147; 148; 144; 192; 68; 131; 43; 13; 10; 15; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL D” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 1486/MUM/2024 Assessment Year: 2017-18 Income Tax Officer 19(3)(1) 405, Piramal Chambers, Lalabaug Mumbai 400012 Vs. Raichand Parasmal Chokshi 305, Ashirwad Building, 10th Khetwadi Lane, Mumbai 400004. (PAN: AAAPC6486C) (Appellant) (Respondent) ITA No. 3374/MUM/2024 Assessment Year: 2017-18 Income Tax Officer 19(3)(1) 405, Piramal Chambers, Lalabaug Mumbai 400012 Vs. Raichand Parasmal Chokshi HUF 305, Ashirwad Building, 10th Khetwadi Lane, Mumbai 400004. (PAN: AAAHR1005A) (Appellant) (Respondent) Present for: Assessee : Shri Umang Shah, CA Revenue : Shri R.R. Makwana, Addl. CIT Date of Hearing : 23.01.2025 Date of Pronouncement : 22.04.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: These two appeals filed by the Revenue are in the case of an individual and HUF against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC) Delhi, vide order no. ITBA/NFAC/S/250/2023- 2 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 24/1060184522(1) dated 29.01.2024 for individual and order no. ITBA/NFAC/S/250/2024-25/1064573907(1), dated 02.05.2024 for the HUF, passed against the assessment orders by Income Tax Officer 19(3)(1), Mumbai u/s. 144 r.w.s 147 of the Income-tax Act (hereinafter referred to as the “Act”), dated 29.05.2023 and 21.04.2023, respectively for individual and HUF for Assessment Year 2017-18. 2. Appeal in ITA No. 1486/Mum/2024 is by the individual and that in ITA No. 3374/Mum/2024 is by the HUF with the present individual as its Karta. Common issue is involved in both the appeals by the Revenue, raising identical grounds except for variation in the quantum of addition made by the ld. Assessing Officer. Accordingly, grounds taken by the revenue in the case of individual in ITA No. 1486/Mum/2024 are reproduced as under: 1. \"Whether on the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition u/s 68 of the Act of Rs. 53,84,100/-, being the exempt LTCG claimed in the ROI u/s 10 (38) of the Act on sale of penny stock script.\" 2. \"Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in ignoring the fact that action of Assessing Office was based on credible information received from the DGIT( Investigation ) that assessee had engaged in trading activities of shares in M/s. Monotype India Ltd, which was flagged as a penny stock and allegedly used for accommodation entry purposes in the grab of Long Term Short Term Capital Gain or Loss ?\" 3. Whether on the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in ignoring the fact that the assessee has traded in shares of penny stock company M/s. Monotype India Ltd, and claimed exempt income from LTCG u/s 10(38) of the Act, was a predetermined move which has a sole aim to bring back unaccounted money through bogus LTCG/STCL ?\" 3 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 4. \"Whether on the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in ignoring the fact that the assessee was allotted shares of M/s. Shubhankar Vinimay Ltd on 05.06.2013 relevant to F.Y. 2013-14, which was amalgamated into M/s. Monotype India Ltd, a Penny Stock Company in F.Y. 2014-15 and shares were sold in F.Y. 2016-17, through \" Manoj Javeri Stock broking (P) Ltd, who was facing charges of providing fake shareholding certificates & contract notes to beneficiaries by coning general public & genuine investors, which was amply evident that the share transactions made were not genuine one and predetermined move to bring back unaccounted money by claiming it as exempt from taxation ? 5. \"Whether on the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in considering the fact that the Net Worth and the business activity of M/s. Monotype India Ltd, were negligible and the share prices tave been artificially rigged by the Manoj Jain and there group operators to accommodate beneficiaries seeking LTCG. It is therefore evident that the price rise in the shares of M/s. Monotype India Ltd, penny scrip which was defunct and inoperative has been achieved by manipulation and rigging through controlled trade on miniscule volume? \" 6. \"Whether on the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in ignoring the fact that during the search and seizure action, Shri Naresh Manakchand Jain, Director of M/s. Monotype India Ltd in his sworn statement that this penny stock was used for manipulation of prices and other operators havehelped him in front running and rigging the price of M/s. Monotype India Ltd and has arranged prospective beneficiaries by allotting shares to shareholders of amalgamating companies ?\" 7. \"Whether on the facts and circumstances of the case and in law the CIT(A) erred in deleting the disallowance of Long Term Capital Gains of Rs. 53,84,100/-without considering the fact that Assessing Office relying on the report of Investigation Wing which is premier investigation authority of Income - Tax Department and the onus is on the assessee to establish the genuineness of the price hike and also has to prove that the price of the share was not 4 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 manipulated. Reliance is placed on Calcutta High Court decision in the case of Pr. CIT Vs. Swati Bajaj (I.A. No. GA/2/2022 in ITAT No. 6 of 2022 dated 14.06.2022. 8. \"Whether on the facts and circumstances of the case and in law the order of the CIT(A) ignored the direct and circumstantial evidences in view of the decisions in Durga Prasad More(1971) 82 ITR 540(SC) and Sumati Dayal (1995) 80 Taxmann 89(SC)/(1995] (1995] ITR ITR 801(SC) / |1995) CTR CTR (SC (SC), rendered by the Hon'ble Supreme Court, where under it was held that the Court and Tribunal have to judge the evidence before it by applying the test of human probabilities, the surrounding circumstances which exercise had been done by the Assessing Officer?\" 9. \"The appeal is being filed as it is covered under the exception provided in the CBDT's Circular No. 23/2019 Dated. 06.09.2019, the assessee is involved in trading of penny stocks script and claimed bogus LTCG on sale of penny stock.\" 10. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary\" 2.1. As many as nine grounds taken by the Revenue are all in respect of addition made under section 68 by denying exemption claimed under section 10(38) of the Act for the sale proceeds of listed equity shares of Monotype India Limited (Monotype) alleged as penny stock, amounting to ₹53,84,100/- in ITA No. 1486/Mum/2024 (individual) and ₹53,86,350/- in ITA No. 3374/Mum/2024 (HUF). We take up the case of individual as the lead case to draw the facts and give our observations and findings which shall apply mutatis mutandis to the other appeal of the HUF. 3. Brief facts of the case are that, assessee filed his original return of income on 04.08.2017 reporting total income at Rs.6,21,980/- wherein 5 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 he reported long term capital gain (LTCG) of Rs.54,09,390/- on sale of shares of listed company viz. Monotype and claimed it as exempt u/s 10(38) of the Act. Subsequently, ld. Assessing Officer received information from DDIT(Inv.) Unit – 7(1) & 7(3), Mumbai on the INSIGHT portal about the conduct of search and survey action on 19.03.2019 on a syndicate of persons led by Shri Naresh Jain. Case of the assessee was taken up for assessment by invoking the provisions of section 148 r.w.s. 147. Since assessee traded in the scrip of Monotype, it was alleged that assessee had brought its unaccounted money in the books of account through accommodation entry involving sale and purchase of this alleged penny scrip. 3.1. Assessee purchased 3,00,000 shares as per contract note at price of Rs. 3,24,000/-(including brokerage charges) of Shubhankar Vinimay Ltd. on 05.06.2013 through the broker Manoj Jhaveri Stock Broking (P) Ltd having SEBI Registration Number INB 010994933. Shubhankar Vinimay Ltd. was thereafter, amalgamated with Monotype India Ltd. in A.Y. 2015-16. Assessee sold the shares through broker Deal Depot Brokerage (P) Ltd. having SEBI Registration Number INZ 000257137. Details of transactions in the shares of Monotype are tabulated as under:- Date of Sale Sale Price Purchase Price Purchase Date Quantity of Shares Sale Value Gain/Loss 24.03.2017 17.57 1.08 03.06.2013 60,000 10,54,200 9,89,088 29.03.2017 16.76 1.08 03.06.2013 15,000 2,51,400 2,35,155 16.03.2017 18.03 1.08 03.06.2013 75,000 13,52,250 12,70,860 17.03.2017 18.31 1.08 03.06.2013 75,000 13,73,250 12,91,860 20.03.2017 18.04 1.08 03.06.2013 75,000 13,53,000 12,71,610 Total 3,24,000 3,00,000 53,84,100 50,58,533 6 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 3.2. In the course of assessment, Ld. Assessing Officer called for details and explanations in respect of the transaction of sale of shares on which exemption has been claimed under section 10(38) on account of long-term capital gain earned by the assessee. To corroborate the facts, assessee furnished the relevant documentary evidences which are placed on record in the paper book before us and includes: i. Statement of computation of Capital Gains showing name of company, date of acquisition, cost of acquisition, date of sale, amount of sale consideration and LTCG earned thereon. ii. Copies of contract notes for purchase and sale of shares showing contract no, trade date settlement sate, settlement no, no of shares, rate per share, amount of brokerage, amount of STT and amount of stamp duty thereon and iii. Copy of Demat Statement for purchase and sales and the copy of broker ledger. 3.3. Ld. Assessing Officer, after considering the submissions made by the assessee, arrived at the adverse conclusion by observing that there is unusual rise in the price of the shares sold by the assessee which has been investigated by the Investigation Wing of the Department to establish that cash has been routed from various accounts to provide accommodation to the assessee and that assessee had failed to discharge his onus to prove the unusual rise and fall of share prices. Ld. Assessing Officer placed heavy reliance on the doctrine of preponderance of human probability to hold that the assessee is 7 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 indulged in bogus and dubious share transactions since he had not been able to adduce cogent evidences in this regard. 3.4. It is worth noting that before drawing adverse conclusion, ld. Assessing Officer deliberated on the general modus operandi of such transactions as well as background of the investigation carried out by the wing, without pinpointing anything specific towards assessee, in this regard. 3.5. Ld. Assessing Officer, thus completed the assessment by making an addition u/s 68 of the Act towards entire sale consideration of Rs. 53,84,100/- received by the assessee on the transaction of sale of shares in the aforesaid scrip. Aggrieved, assessee went in appeal before the ld. CIT(A), who after detailed examination and deliberation of facts and jurisprudence, deleted the same. 4. Before us, ld. Counsel for the assessee reiterated the submissions made before the authorities below. He also placed on record all the relevant documents and evidences in the form of paper book, details of which are already noted above, backed by judicial precedents of the Hon’ble jurisdictional High Court of Bombay. The submissions so made are not reiterated to avoid duplicity. Ld. Counsel also referred to the on- line submission dated 17.05.2023 made by Shri Naresh Jain before the ld. Assessing Officer wherein he stated that assessee is not known to him and he has not entered in any transactions with the assessee in the year under consideration. Copy of e-Proceedings Response Acknowledgement is placed in the paper book at page 138. 8 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 4.1. Assessee strongly contended that he is a regular investor in capital market and not a one-time adventurer. He furnished the details of his portfolio of shares as reflected in the statement placed in the paper book at pages 155 to 178. Perusal of the same shows that assessee dealt in the shares of large number of scrips, to name a few, Gujarat State Fertilizer, DLF, Delta Corp, Reliance Capital, Tata Motors, Kesoram Industries, Bharat Heavy Electricals, Hindalco, Exide, ITC, HEG, Bombay Dyeing, etc. demonstrating his claim as a regular investor. Further, assessee contended that it sold only a portion of its shareholding in Monotype and withheld the balance. This holding also demonstrates the bonafides of the assessee being regular investor and the allegations made by ld. Assessing Officer are without any basis. 4.2. In summary, assessee contended that – i. he is a regular investor in the market and not a onetime adventurer. ii. he has carried out transaction through SEBI registered reputed broker. iii. he has made the investment in various scrips and sold the shares of Monotype after payment of applicable STT, which as per provisions of section 10(38) of the Act is considered as exempt income. iv. genuineness of the transactions is supported by contract notes, ledger copy, DMAT statement and bank statement. v. transactions were made through banking channel. vi. No effective cross-examination opportunity afforded for material and statement relied upon by the ld. Assessing Officer based on information supplied by the Investigation Wing violating the principles of natural justice, more particularly 9 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 when Shri Naresh Jain, whose statement is relied upon has submitted that he does not know the assessee and has not transacted with him. vii. No adverse finding by SEBI on the trading in Monotype scrip, thus, doubts and apprehensions raised by the ld. Assessing Officer does not hold ground. 5. In the course of hearing, ld. DR had placed reliance on the order of ld. Assessing Officer and asserted that the share transactions undertaken by the assessee are of tainted scrip which were investigated and subjected to penalties. 6. We note that transactions were undertaken through the SEBI registered brokers on the stock exchange platform on which STT was levied and the consideration was routed through normal banking channel. The entire flow of these transactions is corroborated by relevant documentary evidences placed on record. While making the addition, there are no discrepancies pointed out by the Assessing Officer in the documents and the details furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee 10 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case. 7. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp movement in the share prices of the aforesaid scrip is not justified. He has relied upon the search and survey operations conducted by the investigation wing of the Department at various locations in respect of alleged penny stock which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assessee is un-supported by any cogent material on record. It is also a fact on record that assessee is a regular investor, dealing in large number of scrips. The finding arrived at by the ld. Assessing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already noted above, forming part of the paper book. 7.1. Reliance placed by the ld. Assessing Officer on the report of investigation wing without further corroboration based on cogent material does not justify the conclusion that the impugned transaction is bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transaction cannot be 11 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging. 8. We have perused the order of ld. CIT(A) to note elaborate exposition on each of the aspect alleged by ld. Assessing Officer. Ld. CIT(A) has dealt with both, fact and jurisprudence relating to the transaction undertaken by the assessee. The same is extracted below for ready reference: 7.3 In the light of above documentary evidences, in my considered view, the transactions of sale of share of Monotype India Limited, by the Appellant, cannot be disbelieved unless and until contrary to the same has not been established by the AO, as held in a number of judicial decisions. From the assessment order, which is summarized in the preceding paragraphs, it is clear that the AO has neither examined the above mentioned documents nor verified the claims made by the Appellant. No specific findings with respect to the Appellant vis-a-vis manipulation in the prices of the shares of Monotype India Limited have been brought on record by the AO. Rather than making the necessary enquiry and investigation so that contradictions in the claim of the Appellant are established, the AO has just reproduced the enquiry report of the Investigation Wing. The observations/reference made by the AO, in the impugned assessment order, are general in nature and there seems to be no effort made to co- relate the same with the Appellant. 7.4 None of the statements relied upon and as extracted by the AO in the impugned assessment order has any relevance/relationship with the transactions carried out by the Appellant. None of the statements as extracted by the AO, in various notices had named the Appellant as the beneficiary nor the appellant has dealt with the persons on whose statement, the AO has relied upon. 7.5 Further, it is observed from the assessment record that, during the assessment proceedings Appellant has raised several contentions where appellant has demanded for the copies of statements of Shri Naresh Jain and the complete information-received from Investigation Wing basis which the assessment has been re-opened. The AO has not provided the information and the statements as sought by the appellant during the entire assessment proceedings only certain extracts of the statements of Shri Naresh Jain has been provided in the notices served by the AO. 7.6 From the above, it is clear that the AO has completely overlooked the contention of the Appellant and has completed the assessment by making general observations and without placing on record the complete information received from investigation wing and the copies of statement recorded. The Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE held that when the assessment was made on 38 ITA NO. 259/MUM/2021 (A.Y: 2015-16) Shri Deepak Valji Karia on the basis of the statements recorded from 12 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 third parties and those statements were not provided nor cross-examination was given to the assessee, the Assessment Order made based on those statements is bad in law. 7.7 Further, the Appellant had sought for cross-examination with Shri Naresh Jain during the course of assessment proceedings. The AO has mentioned in the assessment order that Shri Naresh Jain was present during the cross- examination proceedings but the Appellant failed to attend the same. Hence, the AO has concluded that, that the assessee has deliberately avoided this opportunity to confront the entry provider from whom he has taken accommodation entry in the form of share transaction. 7.8 In connection to the above the Appellant had mentioned that, the summons notice u/s 131 of the Act was not sent to him through the Income Tax Portal where as it was sent on email of the consultant of the Appellant. The Appellant had also requested for the copy of the statement of Shri Naresh Jain recorded during the course of cross-examination proceedings during the video conferencing. However, the copy of the same was also not provided to the Appellant. Further, on perusal of the reply filed by Shri Naresh Jain during the cross-examination proceedings it can be observed that, Shri Naresh Jain has himself stated that, he has not entered into any transaction with the Appellant during the year under consideration and is not known to any person named Raichand Parasmal Chokshi. 7.9 The Appellant has also mentioned that in the extract of statement provided, it is mentioned that, Shri Naresh Jain has manipulated the script M/s Monotype India Ltd. through brokers \"Fair Intermediate Investment Private Limited\", \"Eureka Stock and Share Broking Services Ltd and other Shirish Shah entities. The Appellant had purchased the script \"Monotype India Ltd\" through the SEBI Registered broker \"M/s Manoj Javeri Stock Broking Private Limited\" and sold through \"M/s Deal Depot Brokerage Private Limited\". Both the brokers are independent brokers and not related to Shri Naresh Jain or any other Shirish Shah entities. Hence, there are no adverse findings related to the Appellant in the statement of Shri Naresh Jain provided. M/s Monotype India Ltd. being a listed script, anybody having a demat account can buy and sell the shares and it does not mean that all the buyers and sellers of the shares have entered into any bogus transactions 7.10 In my considered opinion, it is asserted that, the Assessing Officer (AO) has failed to provide substantiating evidence confirming the Appellant's involvement in any fictitious transactions or the acceptance of accommodation entries. The broad and unsubstantiated claim made in the reasons for reopening, suggesting that the Appellant obtained accommodation entry through trading in scripts managed by Shri Naresh Jain, lacks specificity. The AO should have, at the very least, disclosed the particulars of the material received and the timeline of its reception to bolster the credibility of the allegations. The way the conclusions have been reached in the assessment order will not pass through the litmus test of the Hon'ble Courts. The courts have always held that all these information may only create doubts and suspicion which cannot take the place of evidence. No specific evidence showing nexus of the Appellant with the conversion of un-accounted money unto sale proceeds of shares has been brought on record by the AO. Hon'ble Courts have also held 13 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 that, each transaction is required to be independently inquired into. Suspicion howsoever strong cannot take the character of evidence. 8.1. Taking into consideration the above fact based, thoroughly analysed findings by ld. CIT(A) and the submissions made by the ld. Counsel of the assessee corroborated by relevant documentary evidences, we do not find any reason to interfere with the said findings so arrived by ld. CIT(A). Accordingly, ground nos. 1 to 6 are dismissed. 9. In addition to the above stated findings of ld. CIT(A), we place reliance on the decision in the case of CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon’ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon’ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 10. We also find force of binding nature from the decisions of Hon'ble High Court of Bombay being a jurisdictional High Court: i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held as under:- \"1. The following question of law is proposed: \"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- 14 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was DMATed and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?\" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (\"RFL\") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (\"STT\") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal.” 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs.\" ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: “Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason to add capital gains as unexplained cash credit under section 68” 15 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 iii) CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom) wherein it was held: “Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68” 11. Further, revenue in its ground of appeal no. 7 has contended that issue is a covered matter by the decision in the case of Swati Bajaj & others v. PCIT [2022] 446 ITR 56 (Cal). In the said decision, it was held that assessee had to establish the genuineness of rise in price of shares within a short period of time that too, when general market trend was recessive. However, we note that there are several decisions of Hon'ble Jurisdictional High Court as stated supra which are in favour of the assessee. Accordingly, the same would prevail on the issue before this Tribunal. In the present case, decision of the Hon'ble Non-Jurisdictional High Court carries only a persuasive value. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble Non- Jurisdictional High Court. Hon'ble Supreme Court emphasised therein that the orders of Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon'ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Respectfully following the same, we deem it fit and appropriate to follow the decisions of Hon'ble Jurisdictional High Court of Bombay referred supra wherein the 16 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 impugned issue is decided in favour of the assessee. Moreover, when there are conflicting decisions of various High Courts on the same issue, the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that construction that is favourable to the assessee should be adopted. Hence by following this principle, reliance placed by revenue on the decision of Hon'ble Calcutta High Court in Swati Bajaj (supra) does not hold its fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of Monotype. Accordingly, ground no. 7 taken by the revenue in this respect is dismissed. 12. Further, revenue in its ground of appeal no. 8 has contended on the application of test of human probabilities. As already noted above, ld. Assessing Officer has referred to the theory of preponderance of probability which according to us is applied to weigh the evidence of either side and draw a conclusion in favour of a party which has more favourable factor in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of fact that might go against the assessee. Once nothing has been proved against the assessee with the aid of any direct material, nothing can be implicated against the assessee on the presumption or suspicion, howsoever, strong it might appear to be true. Accordingly, in the present set of facts, ground no. 8 taken by the revenue in this respect is dismissed. 13. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as detailed analytical findings arrived at by ld. CIT(A), we have no reason to interfere with the first appellate order whereby addition made u/s 68 17 ITA Nos. 1486 & 3374/Mum/2024 Raichand Parasmal Chokshi & Other AY 2017-18 towards proceeds of sale of listed shares of Monotype which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38) has been deleted. Accordingly, grounds taken by the revenue in this respect are dismissed. 13.1. Since identical set of facts and circumstance exists in the case of appeal relating to HUF, our observations and findings as stated above in the case of individual apply mutatis mutandis to HUF also. 14. In the result, both the appeals by the revenue are dismissed. Order is pronounced in the open court on 22.04.2025 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 22.04.2025 Divya Nandgaonkar, Stenographer Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "