ITO, GHAZIABAD V. NUPUR GARG, GHAZIABAD

ITA 2116/DEL/2024

AI Insights

The case revolves around the appeal by the Income Tax Officer, Ghaziabad against Nupur Garg concerning the assessment year 2013-14. The core issue was the addition of Rs. 81,03,345 as unexplained money under Section 69A, which the Assessing Officer claimed resulted from dubious transactions in shares of CCL International Ltd., considered a penny stock. The NFAC, however, found the transactions to be genuine, supported by substantial evidence including the financial health of CCL International Ltd. during the relevant period, and the fact that the shares were traded through a registered broker on a recognized stock exchange. The Tribunal's decision was influenced by precedents and rulings from similar cases, notably Reeshu Goel vs ITO, which were upheld by the Delhi High Court.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315799 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Other Referred Cases: Reeshu Goel vs ITO, PCIT vs Krishna Devi
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: SAIF ALI
• Keywords: Question of law; Capital Gains; Accommodation entries; Bogus
• Section: 147; 148; 68

Judgement Text

"INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 2116/Del/2024 (Assessment Year: 2013-14) ITO, Ghaziabad Vs. Nupur Garg, SC-92, Shastri Nagar, Uttar Pradesh (Appellant) (Respondent) PAN: AEXPG2713B Assessee by : Shri Saif Ali, Adv Shri Jasmeet Singh, Adv Revenue by: Shri Amit Katoch, Sr. DR Date of Hearing 16/04/2025 Date of pronouncement 16/05/2025 O R D E R PER MAHAVIR SINGH, VICE PRESIDENT 1. The appeal in ITA No.2116/Del/2024 for AY 2013-14, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2023-24/1060430073(1) dated 02.02.2024 against the order of assessment passed u/s 147 r.w.s. 144B of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.03.2022 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘ld. AO’). ITA No. 2116/Del/2024 Nupur Garg Page 2 of 11 2. Though the revenue has raised several grounds, the only effective issue to be decided in this appeal is as to whether the ld NFAC was justified in deleting the addition made on account of sale of shares aof CCL International Ltd as genuine transactions in the facts and circumstances of the case. 3. Heard the rival submissions. The return of income for the assessment year 2013-14 was filed by the assessee on 30-9-2013 under section 139(1) of the Act. The assessee had transacted in the shares of M/s CCL International Limited during the year under consideration, which was considered to be a penny stock by the Income Tax Department. Based on the Investigation Wing report, the Learned AO proceeded to issue notice under section 148 of the Act on 31-03-2021. In response to the notice under section 148 of the Act, the assessee filed her return of income on 30-04-2021. The assessment was completed under section 144B read with section 147 of the Act by making addition of Rs. 81,03,345/- treating as unexplained money under section 69A of the Act, stating that the assessee had indulged in dubious and unconventional nature of transaction in purchase and sale of shares of CCL International Limited for the purpose of purchasing the exempt long-term capital gains under section 10(38) of the Act. 4. The Learned NFAC observed that assessee is a qualified Chartered Accountant and regularly doing investments in share transactions and had been filing her income tax returns regularly. The Learned AO had only doubted the genuineness of transactions carried out by the assessee in the shares of CCL International Ltd. The ITA No. 2116/Del/2024 Nupur Garg Page 3 of 11 Learned NFAC observed that assessee, being a Chartered Accountant, is capable of independently analysing the sale and purchase of share transactions on her own. The Learned NFAC gave a categorical finding that the financials of CCL International Ltd during the financial year 2012-13 were good and the assessee had sold the shares at different dates at the price quoted in the open market through the recognised stock exchange through a registered share broker. In fact, the assessee had even bought the shares of CCL International Ltd in the open market through a registered share broker. The Learned NFAC gave a categorical finding that CCL International Ltd is not a shell company and was not banned by Bombay Stock Exchange. This buttresses the argument advanced by the Learned DR before us that SEBI had suspended the trading of shares of CCL International Ltd for a short while. In fact, what had happened was though suspension was ordered by SEBI, the same got revoked within a short duration of time. These facts were also taken cognizance by the Learned NFAC by placing reliance on the decision of the Co-ordinate bench decision of this Tribunal in the case of Reeshu Goel vs ITO (ITA No. 1691 /Del/2019 for AY 2013-14 dtd 7-10-2019). In fact, the Learned NFAC had vehemently relied on the said Tribunal decision of Reeshu Goel apart from placing reliance on the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs Krishna Devi [ 431 ITR 361 (Del) ]. The Learned NFAC also observed that there is no direct or indirect material or statement that assessee was either beneficiary or was indulged in bogus transactions. The assessee on her part had duly discharged the onus by proving the genuineness of transaction by filing all the details relating to the purchase, dematerialization which ITA No. 2116/Del/2024 Nupur Garg Page 4 of 11 was done immediately after the purchase of shares and sale which was almost after one and a half years from the date of purchase and all the documents have been produced to prove the genuineness of long-term capital gain claimed as exempt. The Learned NFAC also observed that the facts of the assessee's case are exactly identical with the facts in the case of Reeshu Goel which was decided by the Tribunal referred supra wherein the same scrip from which the assessee had obtained long-term capital gain has been held to be genuine and held not to be a penny stock. Accordingly, the addition made under Section 69A of the Act in the sum of Rs 81,03,345/- as unexplained money stood deleted by the Learned NFAC. 5. None of the factual observations and findings made by the learned NFAC could be controverted by the revenue before us. Since the addition has been deleted by the learned NFAC by following the co- ordinate bench decision of this tribunal in the case of Reeshu Goel referred supra, it would be relevant to reproduce the operative portion of the said decision as under:- “8. On merits of the addition, we find that Ld. Assessing Officer, first of all noted that M/s. CCL International Ltd. is traded in Bombay Stock Exchange under the security ID M/s. CCL International with the security code no. 531900. He has incorporated the financials of the company as per the balance sheet available in the public domain which has been incorporated in paragraph 2 of the order from pages 2 to 5 of the assessment order. Assessing Officer observed that shares of M/s. AAR Infrastructure Ltd. were later on merged in M/s. CCL International Ltd. and then on 09.02.2012 these shares were allotted to various beneficiaries. However, for making such an observation, no such information or material has been stated in the assessment order. Thereafter, he has noted that trading in shares of M/s. CCL International was suspended by BSE in the year 2010 and it has been revoked also in the same year. He has also analyzed the effect of ITA No. 2116/Del/2024 Nupur Garg Page 5 of 11 allotment of shares by M/s. AAR Infrastructure just before the amalgamation date and the pre-split closing price in stock exchange and how the split price of the share kept on rising just in a matter of few months. He has also analyzed the rise of the scrip from Rs.11.10 per share to Rs.129 in the period of 6 months in the year 2010, i.e., between 6.02.2010 to 23.08.2010 during which the price of the scrip had risen from Rs.15/- to Rs.157/- and it kept on increasing. He has even tabulated the history of price rise, volume of transaction undertaken in stock exchange, average price of each date when shares were traded in the BSE and the closing rate, right from the period 06.02.2010 to 25.11.2014, i.e., for almost 5 years and found that the highest price went up to Rs.630/-. Thus, he concluded that there was increase of 1160% in just one year. “16. We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as material referred to before us. As stated above, the assessee has applied for 50,000 shares of M/8. AAR Infrastructure Ltd. for face value of Rs. 10 and paid consideration of Rs.5 lacs vide cheque no. 169799 dated 13.01.2011. The said purchase has been recorded in the accounts of the earlier year and is also reflected from the copy of bank statement place at paper book at pages 25. The purchases made in the earlier years have been accepted as only net LTCG has been taxed by the Assessing Officer. The assessee was allotted shares of M/s. AAR Infrastructure Ltd. and immediately thereafter, the assessee had dematerialised the shares on 26.02.2011 which is evident from the copy of Demat account enclosed at pages 27 to 28 of the paper book. Later, M/s. AAR Infrastructure got amalgamated with M/s. CCL International Ltd. and according to amalgamation scheme, the assessee received 1,25,000 shares of M/s. CCL International Ltd. in the proportion of 250 equity shares Rs.2 per share and Rs.100 equity share of Rs.10 per share. The shares which were allotted on 17.02.2011 have been sold after period of more than 18 to 20 months, i.e., on 29.08.2012 to 10.10.2012. The said shares have been sold through stock broker M/s. Indianivesh Securities Pvt. Ltd. 17. Before us the ld. counsel has in his brief note has stated that following documents and statements were filed before the authorities below: ITA No. 2116/Del/2024 Nupur Garg Page 6 of 11 (a) All the transactions were supported by proper Contracts Notes and delivery of shares was made through De-mat Account with stock broker, M/s Indianivesh Securities Pvt. Ltd. (who is the member of BSE and registered with SEBI). The shares were sold in the open market. The appellant has fulfilled all the condition u/s 10(38) of the Income Tax Act, 1961. The appellant has already filed National Security Depository Limited generated Demat Account and the broker statement relating to the sale of share in our paper book, also relevant demat statement highlighting the shares purchased has already been submitted before the Ld. AO. b) The appellant has earned long term capital gain through genuine purchase and sale of shares of the listed companies in normal course. There was no default on the part of the appellant. Moreover, the appellant has earned the income strictly following the norms and guidelines of SEBI. IF M/ CCL International has been identified as BSE Listed penny stock, the appellant is not even remotely connected with these companies. She was not at all in a position to influence the purchase and sale prices of their shares. Hardship cannot be brought on the appellant, if default is made by the company which is listed in the BSE. c) In support of the genuineness of the transaction the appellant produced the following at the time of assessment proceeding: a) Copy of allotment letter issued by M/s AAR Infrastructures Limited. (Page 25) b) Copy of bank statement reflecting the payment made for the purchase of 50000 equity shares. (Page 26) c) Copy of Demat Account of the appellant. (Page 27) d) Copy of statement of broker reflecting the credit of 50000 equity share through preferential allotment. (Page 28) e) Copy of order of Delhi High Court, dated 08.10.2011 in the matter of amalgamation of M/s AAR Infrastructure Limited into M/s CCL International Limited. (Page 29-44) ITA No. 2116/Del/2024 Nupur Garg Page 7 of 11 f) Copy of Contacts notes reflecting the sale proceeds. (Page 45- 50) g) Copy of Transaction statement reflecting the increase in the number of shares. (Page 51) h) Copy of Bank Statement of the appellant reflecting the amount received on sale of shares. (Page 54). 18. The entire premise of the Assessing Officer for treating the entire transaction to be a bogus Long Term Capital Gain and making addition u/s. 68 is that, firstly, M/s. CCL International Ltd. did not have much financial worth to justify such a price rise; secondly, the SEBI had suspended the trade of the share for a brief period; thirdly, he has pointed out the history of price rise between 06.02.2010 to 25.11.2014 and then has drawn adverse inference that price of these shares were manipulated and rigged in the stock exchange which was solely to provide accommodation entries to the various parties; and lastly, he has also referred to certain inquiry report of Investigation Wing Kolkata during the course of which certain brokers have admitted that they had provided accommodation entries in the scrip of M/s. CCL International. But nowhere in the entire assessment order, there is any reference to any material or evidence that assessee or assessee’s broker have been found to be indulged in any kind of accommodation entry in this scrip. No inquiry whatsoever has been made from the broker of the assessee. Further, during the period in which assessee had purchased the shares and had sold them whether the SEBI had suspended the trading has not been mentioned, in fact, Assessing Officer himself mentions that there was brief suspension in the year 2010, whereas the assessee has purchased shares in the year 2011 and sold them in the year 2012. Coming to the financials, as culled out from the records, the revenue from the operation of M/s. CCL International Ltd. from March, 2010 to March, 2012 was between Rs. 55.25 crore to Rs. 79 crore. Thus, it cannot be held that it was mere a paper entity. From a bare perusal of the history of listing and trading of shares and the quote of Bombay Stock Exchange as quoted in the assessment order, it clearly reflects that as on 06.02.2010, the closing price was Rs. 50 and there was a steady increase and within the period of 4 years the price had reached up to Rs.609 on 25.11.2014. Nowhere, it has been pointed out that the rise was beyond the cap laid down by the SEBI, because the price of the scrip cannot rise beyond the cap prescribed by the SEBI. If the shares have been purchased and sold from the stock exchange on a quoted price with proper contract number, trade time and after paying STT, then it is very ITA No. 2116/Del/2024 Nupur Garg Page 8 of 11 difficult to assume that the sale proceeds received from sale of such shares is bogus, especially when purchase of shares are not in dispute. This inter alia means assessee was in possession of shares which were also dematerialised. To prove that such a transaction was in the nature of bogus or colourable transaction, there has to be some inquiry or material to nail the assessee that she was some kind of a beneficiary in some accommodation entry operation. No defect has been pointed out in the documents submitted by the assessee nor has the broker of the assessee been inquired upon. Simply relying upon the general modus operandi and statement of some brokers recorded by the Kolkata Investigation Wing does not mean that all the transactions undertaken of the scrip M/s. CCL International Ltd. through the country by millions of subscribers are bogus. Thus, in absence of any material or evidence against the assessee, we do not find any reason as to why the claim of Long Term Capital Gain from sale of such share should be denied. Consequently, the addition on account of commission is also deleted. Accordingly, we delete the addition made by the Assessing Officer. 19. In the result, the appeal of the assessee is allowed.” 6. It is pertinent to note that the said decision of this tribunal has been approved by the Hon’ble Jurisdictional High Court in ITA 173 / 2021 dated 14-12-2021 by observing as under :- “6. In the impugned order the Tribunal has held that no enquiry had been conducted and the assessee's broker had not even been examined by the authorities below before passing the impugned orders. The ITAT also held that the scrips of M/s CCL International Ltd. were freely traded at the Bombay Stock Exchange between the years 2011 and 2014 and the assessee had purchased the shares in 2011 and sold the same in 2012. The ITAT also found that the revenue from the operation of M/s CCL International Ltd. from March, 2010 to March, 2012 was between Rs.55.25 crores to Rs.79 crores and the share price during the period 2010 to 2014 had increased from Rs.50 per share to Rs.609 per share. 7. This Court is of the view that there is no perversity in any of the findings given by the Tribunal. The Supreme Court in the case of Ram Kumar Aggarwal & Anr. v. Thawar Das (through LRs), (1999) 7 SCC ITA No. 2116/Del/2024 Nupur Garg Page 9 of 11 303 has reiterated that under Section 100 of the Code of Civil Procedure, the jurisdiction of the High Court to interfere with the orders passed by the Courts below is confined to hearing on substantial question of law and interference with finding of the fact is not warranted if it involves re-appreciation of evidence. The Supreme Court in Hero Vinoth (Minor) vs. Seshammal, (2006) 5 SCC 545 has also held that \"in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the lower appellate court will not be interfered by the High Court in second appeal. Adopting any other approach is not permissible.\" It has also held that there is a difference between question of law and a \"substantial question of law\". Consequently, this Court finds that there is no perversity in the findings of the ITAT. 9. Accordingly, the present appeal is dismissed.” 7. From the above, it could be seen that the relief has been granted by the learned NFAC by merely relying on the co-ordinate bench decision of this tribunal which ultimately stood upheld by the Hon’ble Delhi high court. Hence we do not find any infirmity in the order passed by the learned NFAC. Accordingly, the grounds raised by the revenue are dismissed. 8. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 16/05/2025. -Sd/- -Sd/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT Dated: 16/05/2025 A K Keot Copy forwarded to 1. Applicant ITA No. 2116/Del/2024 Nupur Garg Page 10 of 11 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "