JOINT COMMISSIONER OF INCOME TAX, AJMER V. VIJETA LODHA, JAIPUR

ITA 390/JPR/2023

AI Insights

The case involves the JCIT (OSD), Jaipur as the appellant and Vijeta Lodha as the respondent. The dispute centered on the assessment order for the year 2015-16, which included additions related to LTCG and commissions for bogus entries. The Assessing Officer treated these transactions as bogus based on evidence and various pronouncements, leading to additions in the assessee's income. The CIT(A) initially deleted these additions, which the department appealed against. The Tribunal examined the evidence, including the modus operandi of such scams and the financial credentials of the companies involved, and concluded that the transactions were indeed bogus.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787259 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 22-06-2023
• Other Referred Cases: DCIT vs. Vigyan Lodha, PCIT vs. Swati Bajaj, Sumati Dayal vs. CIT, Suman Poddar vs. Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV SOGANI; THROUGH V.C
• Keywords: Set aside; Opportunity of being heard; Question of law; Unexplained expenditure; Income from undisclosed sources; Cost of acquisition; Bogus purchase; Onus to prove; Capital Gains; Principle of natural justice; Sham transactions; Accommodation entries; Earning of tax free income; Opportunity of cross examination; Penny stocks; Bogus
• Section: 142(1); 68; 69C

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A-Bench” JAIPUR Jh xxu xks;y] ys[kk lnL; ,oa Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRIGAGAN GOYAL, AM& SHRI NARINDER KUMAR, JM vk;dj vihyla-@ITA No. 390/JPR/2023 fu/kZkj.k o\"kZ@AssessmentYear : 2015-16 The JCIT (OSD), Jaipur. cuke Vs. Vijeta Lodha A-8, Mahaveer Nagar, Tonk Road, Jaipur. LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.AEIPJ6235J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Rajeev Sogani, C.A. (through V.C.) jktLo dh vksjls@Revenue by: None lquokbZ dh rkjh[k@Date of Hearing :13/11/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 19/11/2025 vkns'k@ORDER PER: NARINDER KUMAR, JUDICIALMEMBER Revenue has come up in appeal, feeling aggrieved by order dated 24.04.2023, passed by Learned CIT(A), NFAC. Appeal before Learned CIT(A) was filed by the assessee-respondent herein, as earlier she felt aggrieved by the assessment order dated 26.12.2017, relating to the assessment year 2015-16, passed by Deputy Commissioner of Income Tax, Circle-7, Jaipur, whereby four additions were made having regard to Long Term Capital Gain (in short “the LTCG) and Printed from counselvise.com 2 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. Short Term Capital Gain (in short “the STCG”) as well as on account of commissions paid for the bogus entries of LTCG and STCG. Vide impugned order, Learned CIT(A) deleted all the four additions made by the Assessing Officer, and allowed the appeal filed by the assessee. 2. Arguments heard. File perused. 3. In a nutshell, four additions made by the Assessing Officer, relating to the assessment year 2015-16, read as under:- “1.Addition u/s 68 on account of LTCG Rs. 65,63,180/- 2. Addition u/s 69C on account of commission paid Rs. 1,42,604/- 3. Addition u/s 68 on account of STCG Rs. 7765/- 4. Addition u/s 69C on account of commission paid Rs. 2155/-“ In view of the said four additions, total income shown by the assessee in his return of income, was enhanced to Rs. 1,14,25,730/-. Case selected for scrutiny 4. As per case of the department the case of the assessee was selected for scrutiny. Thereupon, notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued on 29.09.2016. It was Printed from counselvise.com 3 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. followed by notice u/s 142(1) of the Act, which was accompanied by detailed questionnaire. 5. As noticed above, four additions were made, while re-computing the income of the assessee, but Learned CIT(A) deleted all the additions. For the purpose of disposal of this appeal by the Revenue, we proceed to take up said additions one by one,. Income from Long Term Capital Gain 6. During financial year 2014-15, the assessee was shown to have income of Rs. 65,63,180/- by way of LTCG, and in this regard, she claimed exemption u/s 10(38) of the Act. Said income was stated to be on purchase and sales of shares. Details of the income are available in the table at page 2 of the assessment order and the same read as under:- Name of scrip Date of purchase Cost of purchase Date of sale Sale proceeds Long term capital gains Centron Industrial alliance Limited 12.11.2012 275000 29.05.2014 3181171 2906171 Centron Industrial alliance Limited 12.11.2012 123750 08.05.2014 1719709 1595959 Centron Industrial alliance Limited 12.11.2012 30764 09.05.2014 429506 398742 Centron Industrial alliance Limited 12.11.2012 137500 20.05.2014 1799808 1662308 Total 567014 713094 6563180 Printed from counselvise.com 4 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. 7. After providing opportunity of being heard to the assessee, the Assessing Officer was of the opinion that from the evidence and different pronouncements & their analysis as available from para 6 to 8.6 establish beyond doubt that unaccounted income of Rs. 65,63,108/- was routed back to the assessee during the year under consideration camouflaged as LTCG, which transactions were proved to be bogus entries; and further that since the assessee failed to furnish any satisfactory explanation, the same was added to the total income of the assessee u/s 68 of the Act. Commission on the above said amount of LTCG 8. In view of the opinion arrived at while dealing with the issue of income by way of LTCG, the Assessing Officer further observed that the bogus entries of LTCG having been provided to the assessee in lieu of commission, as per version furnished by syndicate members, including promoter/directors of penny stock company, share broker etc., the assessee was found to have paid commission @ 2% of sale value of shares of Centron Industrial Alliance Limited ( in short “CIAL) i.e. a sum of Rs. 1,42,604/-. The Assessing Officer also opined that the assessee had failed to furnish any explanation about the source of the income of the said Printed from counselvise.com 5 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. amount paid by way of commission. Accordingly, he treated the said amount as unexplained expenditure and made addition u/s 69C of the Act. 9. A perusal of para 6.1 to 6.5 of the impugned order would reveal that therein the Assessing Officer has narrated the typical modus operandi which is adopted to generate the bogus LTCG /STCG; the role played by the operators, the key persons who manage the entire scheme of such type scam; role of promoters of penny stock, which are usually traded at very low price, and has very small market capitalization; role of the share brokers, who indulge in trading for various bogus or paper companies, without having their business or establishment, in connivance with the operators managing said bogus companies and receiving commission in cash for allowing such bogus companies to trade through them/their terminal. 10. That is how, the Assessing Officer treated the income of LTCG as bogus entries, and made an addition of Rs. 65,63,108/-, and also made an another addition while recording finding that the assessee had paid commission @ 2% of the sale value of shares of the said bogus company. Additions are set aside by CIT(A), NFAC Printed from counselvise.com 6 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. 11. While dealing with the contentions raised on behalf of the assessee, Learned CIT(A) observed in para 4.1 and 4.2 of the impugned order that the assessee had relied upon various judgments of Hon’ble Supreme Court and Hon’ble Courts and also a decision by Coordinate Bench, ITAT, Jaipur in DCIT vs. Vigyan Lodha, in ITA No. 169/JP/2022, and observed that all the judgments were applicable to the facts of the case. Consequently, Learned CIT(A) allowed ground no. 1 raised by the assessee. 12. As regards addition relating to payment of commission of Rs. 1,44,759/-, Learned CIT(A), while dealing with ground no. 3, again relied on decision by the Coordinate Bench in Vigyan Lodha’s case, wherein similar deletion made u/s 69C of the Act was deleted, in allowing said ground of appeal and deleted the addition in the case of the assessee-respondent herein. Other Additions- relating to the STCG and payment of commission thereof 13. As is available from the assessment order, the Assessing Officer dealt with the issue of income from investment by the assessee in the shares of UNISHREE Infra Company. Printed from counselvise.com 7 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. The Assessing Officer observed that said company i.e. UNISHREE was also a penny stock company, whose scrip is said to have been purchased by the assessee on 21.02.2014 for Rs. 1,00,000/- and sold by him on 15.12.2014 for Rs. 1,07,765/-, thereby earning an income of Rs. 7,765/- by way of STCG. 14. The Assessing Officer took into consideration investigation report said to have been received from the Director, Income Tax (Investigation) Kolkatta, which was to the effect that UNISHREE Infra Company, a penny stock company, whose BSE listed company stocks were rigged to provide accommodation entry of LTCG/STCG in view of unaccounted cash commission. 15. Show cause notice dated 04.12.2017 was issued by the Assessing Officer, to which the assessee responded on 07.12.2017 that there was an investment by the assessee in UNISHREE Urban Infra Limited, which raised funds through IPO on BSE platform with market lot of 10,000/- shares, price of each being Rs. 10/- under the regulations of SEBI, and that the assessee was allotted the same on 25.02.2014, and further that shares of UNISHREE were credited in the Dmat of the assessee on the same day. Printed from counselvise.com 8 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. As further claimed by the assessee, it sold the said shares on 15.12.14 for Rs. 1,07,900/-. In support of its claim, the assessee annexed to the reply screen shot of the book building shares available at BSE platform. In this way, the claim of the assessee was that the shares allotted in IPO could not be treated as penny stock or by way of accommodation entries. 16. The Assessing Officer observed that the above said claim of the assessee was not acceptable as the assessee had failed to disclose the name and the address of the persons on whose recommendation he made said investment in unknown listed company, and also because in case of such like modus operandi, shares are closely held and not traded among public in general. The Assessing Officer then repeated the modus operandi from page 43 to 55. Consequently, the Assessing Officer held that it was a case of unaccounted income of Rs. 7,765/- u/s 68 of the Act routed back to the assessee during the year under consideration as STCG, but it was actually Printed from counselvise.com 9 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. a case of bogus entries. As regards said payment of commission for the said STCG, the Assessing Officer made an addition of Rs. 2,155/- u/s 69C. 17. On the other hand, Learned CIT(A), while dealing with the above said addition, and having regard to the grounds raised by the assessee- appellant held that the said amount had already been offered for taxation, and accordingly, deleted said addition. As noticed above, before us the department has specified in the appeal that the department is feeling aggrieved only by deletion of additions pertaining to LTCG and the payment of commission relating to it. We proceed to deal with the grounds raised by the department while challenging the decision of Learned CIT(A) in this regard. Deletion of addition of Rs. 65,63,180/-, on account of LTCG, u/s 68 of the Act. 18. Transactions of purchase/sale of shares, which led to LTCG of Rs. 65,63,180/- and on the basis of which the assessee claimed exemption u/s 10(38) of the Act, were done as regards scrip of M/s CIAL. Printed from counselvise.com 10 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. Contentions 19. Ld. DR for the department has contended that in view of specific observations made by the Assessing Officer, for the reasons recorded in the assessment order, Learned CIT(A) was not justified in deleting the said addition as the share transactions were found to be bogus based on accommodation entries. Ld. DR has submitted that the shares were of unknown company with dubious background, which were purchased for nominal consideration in collusion with the brokers. Ld. DR has stood by the observations made by the Assessing Officer on the basis of documentary and circumstantial evidence and by applying the test of human conduct and preponderance of probability, and also various decisions by Hon’ble Apex Court cited therein. 20. Another contention raised by Ld. DR for the department is that while deleting the addition, Learned CIT(A) relied on decision by Coordinate Bench of ITAT, Jaipur Benches, in the case of Vigyan Lodha (supra), but said decision was not applicable to the peculiar facts and circumstances of this case, as herein the impugned transactions have been manipulated with bogus with brokers, and the shares were sold within short span, and that too in collusion with the brokers, in order to earn exemption. Printed from counselvise.com 11 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. 21. On the other hand, on behalf of the assessee in the written submissions, as regards said addition of Rs. 65,63,180/-, it has been claimed that the assessee is a regular investor in shares and securities. In this regard, in written submissions, reference has been made to page 6 to 10, 12, 13, 38-60 of the Paper Book (in short “PB”) . 22. As per documents available from Paper Book, PB 6 to 10,12 and 13, an application for purchase of warrant 1,65,000/- of Rs. 27.50 was made by the assessee and Vivek Lodha on 06.07.2012, whereupon vide allotment letter PB 7, certificates PB 8 and 9 were issued. The copy of bank statement of Vivek Lodha depicting payment is at P.B. 10. Allotment was by M/s CIAL. As per document dated 12.11.2012 PB 12, the shares on preferential basis were to be dematerialized / dispatched after getting listing approval from BSE. As per this document, lock-in release date was on 11.11.2013. It is case of the assessee that splitting of equity shares from the face value of 10 to Rs. 1/- took place on 23.09.2013. In this regard, reference has been made to P.B 11. Then, reference has been made to P.B. 13 and 14, as regards transfer of shares more Hem Security Limited to Bhargava Lodha Stock Brokers Pvt. Limited on 29.01.2014. Reliance has been Printed from counselvise.com 12 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. placed on PB 15 to support the claim of the assessee regarding transfer of the shares from the joint account of Vivek Lodhaand Vijeta Lodha to their individual accounts on 05.02.2014, as a result whereof 8,50,000 shares were transferred to the individual account of the assessee. Ultimately, reliance has been placed on P.B. 15 i.e. statement of transactions of BLS to support the transactions of sale through Dmat account and also to support the earning of LTCG. 23. Details of the subject income as available in the table at page 2 of the assessment order read as under:- Name of scrip Date of purchase Cost of purchase Date of sale Sale proceeds Long term capital gains Centron Industrial alliance Limited 12.11.2012 275000 29.05.2014 3181171 2906171 Centron Industrial alliance Limited 12.11.2012 123750 08.05.2014 1719709 1595959 Centron Industrial alliance Limited 12.11.2012 30764 09.05.2014 429506 398742 Centron Industrial alliance Limited 12.11.2012 137500 20.05.2014 1799808 1662308 Total 567014 713094 6563180 As already noticed above, in paras 6.1 to 6.5 of the impugned order would reveal that therein the Assessing Officer has narrated the typical modus operandi which is adopted to generate the bogus LTCG /STCG; the role played by the operators, the key persons who manage the entire scheme of such type scam; role of promoters of penny stock, which are Printed from counselvise.com 13 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. usually traded at very low price, and has very small market capitalization; role of the share brokers, who indulge in trading for various bogus or paper companies, without having their business or establishment, in connivance with the operators managing said bogus companies and receiving commission in cash for allowing such bogus companies to trade through them/their terminal. 24. In para 6.6, the Assessing Officer observed that the modus operandi mentioned in para 6.5 was deduced by various Investigation Wings of the Income Tax Department, SEBI and government agencies. He is also stated to have spelt out the above said modus operandi adopted by following such schemes to manipulate markets so as to generate tax exempt LTCG. Findings recorded by SEBI as regards said modus operandi have been reproduced in para 6.6, at page 15 of assessment order. 25. In para 6.6, the Assessing Officer also mentioned about the observations made by a committee headed by the Chairman, CBDT, in its report submitted in the year 2012. 26. In para 7.3, the Assessing Officer observed about comparison of abnormal rise in the share of Centron Industrial Alliance Limited when the BSE Sensex pointed out that during the holding period of the assessee i.e. Printed from counselvise.com 14 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. from 8/9.09.2011 to 31.03.2014, there was decrease as regards Sensex, but, the shares of Centron Industrial Alliance Limited (CIAL) had shown astronomical jump. In this regard, the Assessing Officer reproduced graph of the said company i.e. Centron Industrial Alliance Limited from page 18 to 31, and opined that the said company had actually no financial credentials to support its share movement pattern; that the company did not have fixed assets, had meager turnover, no dividend and no earnings on shares. 27. Balance sheet of Centron Industrial Alliance Limited-CIAL is available from page 31 to 34 of the assessment order. From said document, the Assessing Officer observed that said company was never a profit making company. 28. While dealing with the reply furnished by the assessee that purchase was made through banking challan and sale was made through Dmat Account, and as such, these share transactions should be treated as genuine transactions, the Assessing Officer recorded at page 35 of the assessment order that on the basis of analysis of documentary and circumstantial evidences, human conduct and preponderance of probabilities , it was established that all the financial transactions were Printed from counselvise.com 15 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. sham and entire edifice was only a colourable device for evading due tax by resorting to the abovesaid modus operandi. In this regard, the Assessing Officer relied on certain decisions which find mentioned in para 7.6 to 8.6. 29. That is how, the Assessing Officer treated the income of LTCG as bogus entries, and made an addition of Rs. 65,63,108/-, and also made an another addition while recording finding that the assessee had paid commission @ 2% of the sale value of shares of the said bogus company. 30. The Assessing Officer rejected the claim put forth by the assessee in its reply dated 04.12.2017 as well as in the written submissions, also due to the reason while observing that the assessee had failed to disclose the name and address of the person on whose recommendation the assessee invested in the said unlisted company. Even before us, in the written submissions, the assessee has not disclosed any such particulars. 31. At PB 11 of the assessment order, the Assessing Officer has observed that a bogus entry operator chooses one of such like penny stocks, which does not pose a big picture of its financial affairs before Printed from counselvise.com 16 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. general investor, and in this way the shares are closely held and not treated among public/ in general. 32. The case of the department is that M/s CIAL had no actual financial credence to support its shares movement pattern as explained by the Assessing officer in para 7.3 of the assessment order. The Assessing Officer went on to observe, from the date available from page 18 to 31 that M/s CIAL did not have fixed assets; this company had meager turnover; that the company never paid any dividend; and furthermore said company had no earning of shares. 33. We have gone through data relied on by the Assessing Officer, from the financial of M/s CIAL. We find nothing on record to discard the findings that the said company was not a profit making company and also that its earnings from shares was either zero or negative. 34. Having regard to all this, it remains unexplained to why any person like the assessee would prefer to make investment in such like scrip of such like company and as to why the assessee would have so preferred to make investment in said scrip of CIAL. In CIT Durga More Prasad (1971) Printed from counselvise.com 17 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. 82 ITR 540 followed in Sumati Dayal vs. CIT (1995) 214 ITR 810, Hon’ble Apex Court approved “human probability tests”. 35. In the given situation, the claim of the assessee that M/s CIAL was listed with SBE from 1991, and that its shares were regularly treated in BSE, does not come to the aid of the assessee. 36. Findings recorded by the Assessing Officer that the transactions of purchase and sale of shares by the assessee were bogus, only with an intent to earn profit and to claim of exemption u/s 10(38) of the Act, are also based on the findings of SEBI, as reproduced at page 15 in para 6.6 of the assessment order, and also on the report submitted by 11 Members SIT of the Hon’ble Supreme Court of India on black money, wherein the entire modus operandi adopted in such like case of bogus purchase /sale to convert black money into white money, was also relied on. 37. From the material available on record, the Assessing Officer rightly observed that subsequent to the purchase of the said shares, prices of the scrip were rigged to a large scale, as a result of which the assessee received windfall gain. Printed from counselvise.com 18 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. Therefore, the Assessing Officer was right in observing that the said shares were manipulated only with a few to earn tax exempt income and ultimately, the Assessing Officer treated LTCG as bogus. 38. Since the assessee was not engaged in substantial share trading activities or investment in shares the intention to purchase shares of M/s CIAL can safely be said to be the one i.e. to earn by indulging in bogus shares of LTCG. 39. In PCIT vs. Swati Bajaj (2022) 139 taxmann.com 352, Hon’ble Kolkatta High Court, made certain significant observations as regards the application of human probability tests and preponderance of probability. Relevant portion reads as under:- “The report submitted by the Investigation department could not be thrown out on the grounds urged on behalf of the assessees. The assessees have not been shown to be prejudiced on account of non-furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue, the statements do not indict the assessee. That apart, the investigation has commenced targeting the individuals who dealt with the penny stocks and after examining the modus seeing the cash trail the report has been submitted recommending the same to be placed before the DGIT (Investigation) of all the States of the country. It is thereafter the concerned Assessing Officers have been informed to consider as to the bonafideness and genuineness of the claims of LTCG/LTCL of the respective assessees qua the findings which emanated during the investigation conducted on the individuals who dealt with the penny stocks. Therefore, the assessments have commenced by the Assessing Officers calling upon the assessee to explain the genuineness Printed from counselvise.com 19 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. of the claim of LTCG/LTCL made by them. In all the assessment orders, substantial portion of the investigation report has been noted in full. A careful reading of the same would show that the assessee has not been named in the report. If such be the case, unless and until the assessee shows and proves that she/he was prejudiced on account of such report/statement mere mentioning that non-furnishing of the report or non-availability of the person for cross examination cannot vitiate the proceedings. The assessees have miserably failed to prove the test of prejudice or that the test of fair hearing has not been satisfied in their individual cases. In all the cases, the assessees have been issued notices under sections 143(2) and 142(1) they have been directed to furnish the documents, the assessee have complied with the directions, appeared before the Assessing Officer and in many cases represented by Advocates/Chartered Accountants, elaborate legal submissions have been made both oral and in writing and thereafter the assessments have been completed. Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the inquiry which is being conducted by the Assessing Officer in scrutiny assessment under section 143(3). The assesseewere conscious of the fact that they have not been named in the report, therefore made a vague and bold statement that the non- furnishing of report would vitiate the proceedings. Therefore, merely by mentioning that statements have not been furnished can in no manner advance the case of the assessee. If the report was available in the public domain as has been downloaded and produced by the revenue, nothing prevented the assessees who are ably defended by the Chartered Accountants and Advocates to download such reports and examine the same and thereafter put up their defense. Therefore, the based on such general statements of violation of principles of natural justice the assessees have not made out any case. …” “To prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and leveled and when direct evidence is not available, it is the duty of the Court to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrips of very little known companies. Furthermore, in all the cases, there were minimum of two brokers who have been involved in the transaction. It would be Printed from counselvise.com 20 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income-tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, the methodology adopted by the revenue cannot be faulted. …” A holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, the court cannot lose sight of the fact that the shares of very little known companies with in-significant business had a steep rise in the share prices within the period of little over a year. The revenue was not privy to such peculiar trading activities as they appear to have been done through the various stock exchanges and it is only when the assessees made claim for a LTCG/STCL, the investigation commenced. As pointed out the investigation did not commence from the assessee but had commenced from the companies and the persons who were involved in the trading of the shares of these companies which are all classified as penny stocks companies. Therefore, the argument of the assessee that the copy of the investigation report has not been furnished, the persons from whom statements have been recorded have not been produced for cross examination are all contention which has to necessarily fail. To reiterate, the assessee was not named in the report and when the assessee makes the claim for exemption the onus of proof is on the assessee to prove the genuinity. Unfortunately, the assessees have been harping upon the transactions done by them and by relying upon the documents in their hands to contend that the transactions done were genuine. Unfortunately, the test of genuinity needs to be established otherwise, the assessees are lawfully bound to prove the huge LTCG claims to be genuine. In other words if there is information and data available of unreasonable rise in the price of the shares of these penny stock companies over a short period of time of little more than one year, the genuinity of such steep rise in the prices of shares needs to be established and the onus is on the assessee to do so as mandated in section 68. Thus, the assessees cannot be permitted to contend that the assessments were based on surmises and conjectures or presumptions or assumptions. The assessee does not and cannot dispute the fact that the shares of the companies which they have dealt with were insignificant in value prior to their trading. If such is the situation, it is the assessee who has to establish that the price rise was genuine and consequently they are entitled to Printed from counselvise.com 21 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. claim LTCG on their transaction. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the revenue to prove otherwise. It is incorrect to argue that the assessees have been called upon to prove the negative in fact, it is the assessees duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. The assessees cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assessees have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of the companies whose shares the assessee has dealt with, the genuineness of the price rise which is undoubtedly alarming that to within a short span of time. …” In the matter of Suman Poddar vs. Income Tax Officer,[2019] 112 taxmann.com 330 (SC), Hon’ble Court held as under: “The evidences put forth by the Revenue regarding the entry operation fairly leads to a conclusion that the assessee is one of the beneficiaries of the accommodation entry receipts in the form of long-term capital gains. The assessee has failed to prove that the share transactions are genuine and could not furnish evidences regarding the sale of shares except the copies of the contract notes, cheques received against the overwhelming evidences collected by the Revenue regarding the operation of the entire affairs of the assessee. This cannot be a case of intelligent investment or a simple and straight case of tax planning to gain benefit of long-term capital gains. The earnings @ 491% over a period of 5 months are beyond human probability and defy business logic of any business enterprise dealing with share transactions. The net worth of the company is not known to the assessee. Even the brokers who coordinated the transactions were also unknown to the assessee. All these facts give credence to the unreliability of the entire transaction of shares giving rise to such capital gains. The ratio lay down by the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT, 214 ITR 801 is squarely applicable to the case. Though the assessee has received the amounts by way of account payee cheques, the transactions cannot be treated as genuine in the presence of the overwhelming Printed from counselvise.com 22 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. evidences put forward by the Revenue. The fact that in spite of earning such steep profits, the assessee never ventured to involve himself in any other transaction with the broker cannot be a mere coincidence of lack of interest. Reliance is placed on the judgment in the case of Nipun Builders and Developers Pvt. Ltd. (supra), where it was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee and other surrounding circumstances in order to see whether the assessee is liable to the provisions of section 68 or not. In the case of NR Portfolio, it was held that the genuineness and credibility are deeper and obtrusive. Similarly, the bank statements provided by the assessee to prove the genuineness of the transactions cannot be considered in view of the judgment of Hon'ble court in the case of Pratham Telecom India Pvt. Ltd., wherein, it was stated that bank statement is not sufficient enough to discharge the burden. Regarding the failure to accord the opportunity of cross examination, we rely on the judgment of Prem Castings Pvt. Ltd. Similarly, the Tribunal in the case of Udit Kalra, ITA No. 6717/Del/2017 for the assessment year 2014-15 has categorically held that when there was specific confirmation with the Revenue that the assessee has indulged in non-genuine and bogus capital gains obtained from the transactions of purchase and sale of shares, it can be a good reason to treat the transactions as bogus. The differences of the case of Udit kalra attempted by the Ld. AR do not add any credence to justify the transactions. The Investigation Wing has also conducted enquiries which proved that the assessee is also one of the beneficiaries of the transactions entered by the Companies through multiple layering of transactions and entries provided. Even the BSE listed this company as being used for generating bogus LTCG On the facts of the case and judicial pronouncements will give rise to only conclusion that the entire activities of the assessee is a colourable device to obtain bogus capital gains. The Hon'ble High Court of Delhi in the case of Udit Kalra, ITA No. 220/2009 held that the company had meagre resources and astronomical growth of the value of the company's shares only excited the suspicion of the Revenue and hence, treated the receipts of the sale of shares to be bogus. Hon'ble High Court has also dealt with the arguments of the assessee that he was denied the right of cross examination of the individuals whose statements led to the enquiry. The ld. AR argument that no question of law has been framed in the case of Udit Kalra also does not make any tangible difference to the decision of this case. Since the additions have been confirmed based on the enquiries by the Revenue, taking into consideration ratio laid down by the various High Courts and Hon'ble Supreme Court, our decision is equally applicable to the receipts obtained from Printed from counselvise.com 23 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. all the three entities. Further, reliance is also placed on the orders of various Courts and Tribunals listed below: ♦ MK. Rajeshwari v. ITO in ITA No. 17231Bangl2018, order dated 12.10.2018. ♦ Abhimanyu Soin v. ACIT in ITA No. 9511Chdl2016, order dated 18.04.2018. ♦ Sanjay Bimalchand Jain v. ITO. 89 taxmann.com 196 ♦ Dinesh Kumar Khandelwal, HUF v. ITO in ITA No. 58 & 591 Nagl 2015, order dated 24.08.2016. ♦ Ratnakar M Pujari v. ITO in ITA No. 9951Muml2012, order dated 03.08.2016. ♦ Disha N Lalwani v. ITO in ITA No. 6398 I Mum I2012, order dated 22.03.2017. ♦ ITO v. Shamim. M Bharwoni [2016] 69 taxmann.com 65. ♦ Usha Chandresh Shah v. ITO in ITA No. 6858 I Mum I 2011, order dated 26.09.2014. ♦ CIT v. Smt. Jasvinder Kaur 357 ITR 638. 12. The facts as well as rationale given by the Hon'ble High Court are squarely applicable to the case before us. Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the assessee are a part of major scheme of the accommodation entries and keeping in view the ratio of the judgments quoted above, we, hereby decline to interfere in the order of the Ld. CIT(A).\" 40. As is going to be discussed hereinafter, actually, this is a case of no investment made by the assessee in the transactions of shares so as to be held entitled to any such exemption under section 10(38) of the Act. 41. A perusal of P.B. 6, the application for interestedness to invest in M/s CIAL would reveal that the application purports to have been submitted by Printed from counselvise.com 24 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. two applicants namely Vivek Lodha and Vijeta Lodha. As per P.B. 7, intimation of allotment of warrants entitling toconvert into Equity shares, same was issued in the name of the said two applicants, but, as per P.B. 10, the amount is said to have been invested only by Vivek Lodha. In this regard, reliance may be placed on P.B. 10 statement of account of Vivek Lodha. In view of this fact of investment only by Vivek Lodha, how can it be said to be a case of investment in the said shares by both the applicants i.e. Vijeta Lodha and Vivek Lodha. No explanation is coming forth in this regard from the side of the assessee in the written submissions. P.B. 15 is the document regarding transaction reported as on 05.12.2018. This document has been issued by Bhargawa Lodha Stock Broker Pvt. Ltd. In the first column, it depicts the name only of Vijeta Lodha. In this document, name of the assessee-Vijeta Lodha does not find mention. Proceeding further, as claimed by the assessee, transfer of shares from the joint accounts of the assessee and Vivek Lodha is stated to have taken place on 05.02.2014 and as a result 8,50,000/- shares came to be transferred to the name of Vivek Lodha and Vijeta Lodha-assessee. But, Printed from counselvise.com 25 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. there is nothing to suggest transfer of shares by M/s CIAL to the individual account of the assessee and Vivek Lodha. It remains unexplained as to how the stock broker could depict said transaction as shown P.B. 15, only in the name of Vijeta Lodha. In view of the material available, it cannot be said that the transaction undertaken by the assessee had no co-relation with the features of sham transaction. The contention on behalf of the assessee that the Assessing Officer could have joined the brokers in the enquiry as they were from Jaipur does not come to the aid of the assessee, when the assessee did not take any step for examination of the brokers before the Assessing Officer. 42. As regards the claim put forth by the assessee that she is a regular investor in shares and securities and as such no mala fide could be attributed to the assessee, we may observe that even if the assessee has placed on record ITRs for the AYs 2013-14, 2014-15, 2016-17 and 2017- 18, in support of said claim, it was for the assessee to prove her claim that the subject transactions were genuine. Here, the Assessing Officer restricted the adjudication to the shares which were purchased from penny stock company and sold the same, when the rise of the prices of the shares Printed from counselvise.com 26 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. was artificially done by the adopting manipulative practices, as described in the assessment order. In this regard, reliance is placed on the decision in Swati Bajaj’s case (supra), wherein Hon’ble Court observed as under: “While it may be true that assessees could have been regular investors, investors could or could not have been privy to the information or modus adopted. What is important is that it is the assessee who has to prove the claim to be genuine in terms of section 68. Therefore, the assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time and more importantly after a period of 17 to 22 months, thereafter has been a steep fall which has led to huge claims of STCL. Therefore, unless and until the assessee discharges such burden of proof, the addition made by the Assessing Officer cannot be faulted. [Para 75] None of the assessees have been shown to be big time investor. This is evident from the income details of the assessee which has been culled out by the respective Assessing Officers. Assuming that the assessee is a regular investor as was submitted by the assessees that in any manner cannot improve the situation as the claim for LTCG has been only restricted to the shares which were purchased and sold by the assessees in penny stocks companies. Therefore merely because the assesseehad invested in other blue chip companies had earnedprofit or incurred loss cannot validate the tainted transactions. It has been established by the revenue that the rise of the prices of the shares was artificially done by the adopting manipulative practices. Consequently whatever resultant benefits which accrue from out of such manipulative practices are also to be treated as tainted. However, the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee has reaped was not tainted. This has not been proved or established by any of the assessee. Therefore, the Assessing Officers were well justified in coming to a conclusion that the so called explanation offered by the assessee was not to their satisfaction. Thus, the assessee having not proved the genuineness of the claim, the creditworthiness of the companies in which they had invested and the identity of the persons to whom the transactions were done, have to necessarily fail. In such factual scenario, the Assessing Officers as well as the Commissioner (Appeals) have adopted an inferential process which is found to be a process which would be followed by a reasonable and prudent person. The Assessing Officers and the Commissioner (Appeals) have culled out proximate facts in each of the cases, took into consideration Printed from counselvise.com 27 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. the surrounding circumstances which came to light after the investigation, assessed the conduct of the assessee, took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion which is a proper conclusion and in the absence of any satisfactory explanation by the assessee, the Assessing Officers were bound to make addition under section 68.” 43. One of the submissions on behalf of the assessee is that she sold shares between 8.5.2014 to 29.5.2014, but the Assessing Officer took into consideration share price table for the period from April, 2011 to March, 2014 i.e. not related to the period under consideration, and as such, the additions deserved to be set aside. 44. In this regard, reference may be made to para 7.3 of the assessment order. Therein, the Assessing Officer on comparison of the abnormal rise in the share of CIAL with the BSE SENSEX points during the holding period i.e. 8/9.9.2011 to 31.3.2014, observed that BSE SENSEX had seen a decrease by 31.18% whereas shares of CIAL had reflected astronomical jump. 45. The assessee did not bring on record any data contrary to the above to rebut the observations that while BSE SENSEX points during the abovesaid period had not seen decrease or that shares of CIAL had not shown astronomical jump. Printed from counselvise.com 28 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. In view of the above coupled with the other reasons and findings recorded above, even this contention on behalf of the assessee cannot be sustained. Impugned order is devoid of material aspects and discussions thereon 46. A perusal of the impugned order by Learned CIT(A) would reveal that he nowhere discussed the reasoning and the findings recorded by the Assessing Officer in making said two additions. He simply relied on the precedents without explaining anywhere as to how the decisions relied on were applicable to the facts of present matter. Learned CIT(A) nowhere dealt with the part of the assessment order wherein the Assessing Officer narrated the modus operandi adopted in suchlike transactions. Learned CIT(A) was required to deal with each reason and finding recorded by the Assessing Officer in making the two additions. This speaks volumes about the manner in which the appeal came to be disposed by Learned CIT(A) without going into depth of the matter before setting aside the well founded findings recorded by the Assessing Officer. From the material available on record, we uphold the conclusion arrived by the Assessing Officer, having regard to the decisions in PCIT vs. Printed from counselvise.com 29 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. Swati Bajaj, [2022] 139 taxmann.com 352 (Cal.); CIT Durga More Prasad (1971) 82 ITR 540 followed in Sumati Dayal vs. CIT (1995) 214 ITR 810, already referred to above. 47. In view of the material available and the reasons recorded by the Assessing Officer there is no merit in the contention on behalf of the assessee that the Assessing Officer place reliance only on the general observations of the Investigation Wing of Kolkatta, or that the Assessing Officer on the basis of pre-conceived notion completed the assessment making the above said additions or that he was swayed away by unrelated information. In view of the steps taken by the Assessing Officer, it cannot be said that the Assessing Officer did not comply with the provisions of section 142(2) of the Act or that assessment was framed without any separate or independent enquiry. Decision in Vigyan Lodha’s case distinguishable on facts 48. A perusal of the impugned order would reveal that Learned CIT(A) observed that the appellant had relied upon various judgments of Hon’ble Supreme Court and High Court. Printed from counselvise.com 30 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. Learned CIT(A) went on to observe that all the judgments are applicable to the facts of the case. Learned CIT(A) further observed that the Co-ordinate Bench had distinguished the judgment of Hon’ble High Court of Kolkata in the case of Swati Bajaj on the ground that in the present case specific request was made for the copy of investigation report as well as copies of statements of different persons stated by the assessee. In view of the above observations, Learned CIT(A) allowed the appeal on ground No.1 of the grounds of appeal relating to addition of Rs. 65,63,180/-. 49. On going through the discussion on this ground of appeal, it transpires that Learned CIT(A) mainly and specifically relied on the decision by Co-ordinate Bench, ITAT, Jaipur in Vigyan Lodha’s case (ITA No.169P/JP/2022. Only 3 paragraphs (4., 4.1 and 4.2) of the impugned order deal with grounds No.1 of the grounds of appeal i.e. as regards addition of Rs. 63,63,180/-. Printed from counselvise.com 31 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. It may be mentioned here that neither in para 4, 4.1 nor in para 4.2 Learned CIT(A) referred to the decisions by Hon’ble Supreme Court and High Courts, or to the relevant text(s) with facts in brief, to suggest that said decisions relied on by the appellant-assessee were applicable to the facts of present case. As regards reference to observations by the Co-ordinate Bench, ITAT, Jaipur in Vigyan Lodha’s case, distinguishing therein Swati Bajaj’s case from the said case, reliance was placed only on the factum of non supply of copy of investigation report as well as copies of statements of different persons. Generally, while adjudicating issues involved in any matter, the authorities are required to give bring narration of the facts of the case so that it is easy for the higher authorities to find out as to whether facts of the case were similar to the facts of the referred to cases or the facts of the two cases were distinguishable. Significant to note that Learned CIT(A) in the impugned order nowhere referred to the facts of the case pertaining to Vigyan Lodha’s case or the facts of the assessee-Vijeta Lodha or the facts of the other Printed from counselvise.com 32 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. judgments so as to support the observation that all the judgments were applicable to the facts of Vijeta Lodha’s case. In this regard, it may be mentioned here that Vigyan Lodha’s case was a case wherein the Assessing Officer had gone through reports of investigation wing of New Delhi, Mumbai, Kolkatta relating to the actions conducted by them in cases of bogus LTCG/STCG/STCL/Loss entry providers and also in cases of beneficiers of said arrangement. Said reports revealed that co-ordinated actions under section 132(1) and 133 of the Act were carried out by the Investigation Wing of Kolkata, Mumbai, New Delhi and other units of the country. Statements of certain individuals relating to such bogus entry providers/beneficiaries were recorded under sections 132(4) and 131 of the Act and that is how LTCG etc., were uneathed. Herein, the Assessing Officer observed in the assessment officer that the books of accounts produced by the assessee produced during the course of assessment proceedings were put to test check, when the case was selected for scrutiny and notice under section 143(2) of the Act was issued. Printed from counselvise.com 33 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. In the course of arguments, Learned DR produced here on 28.5.2025 copies of proceeding sheets before the Assessing Officer. As is available from PB 25 of the department on 4.12.2017, Shri Rajeev Bafna, CA, representing the assessee before the Assessing Officer was provided with information received from the Wing. There is nothing to the contrary from the side of the appellant to disbelieve what stands recorded at PB 25. In view of the above discussion, we do not find any merit in the contention put forth in the written submissions that the Learned CIT(A) was justified in deleting the two additions as the Assessing Officer did not record any finding that the documents produced by the assessee were false, fabricated or fictitious. 50. As regards non providing of any opportunity to the assessee for cross-examination of any witness as claimed by the assessee in the written submissions, it may be mentioned at the cost of repetition that the Assessing Officer initiated proceedings after the case was selected for scrutiny and notice under section 143(2) of the Act was issued and that is how the books of accounts of the assessee produced during assessment proceedings were put to test check. Vide order dated 28.11.2017, Learned Printed from counselvise.com 34 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. AR of the assessee was asked to show cause as to why exemption on the basis of LTCG claim should not be treated as gain from Penny Stock. The show cause notice came to be issued after the Assessing Officer had gone through the information already available with him and also considered the datas of the company available on the internet. In this situation, there was no question of cross-examination of any witness. In the given situation, the decisions referred to in the written submissions of the assessee do not come to the aid of the assessee. 51. In the given and peculiar facts and circumstances, other decisions relied on behalf of the assessee and available in the compilation of cases, do not come to the aid of the assessee. Result 52. In view of the above discussion, reasons and findings, the impugned order passed by Learned CIT(A) deleting the addition of Rs. 65,63,180/- deserves to be set aside. We order accordingly. Addition as regards payment of commission in arranging accommodation entry for LTCG of Rs. 65,63,180/-. Printed from counselvise.com 35 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. 53. As noticed above, this addition was made by the Assessing Officer while observing that the assessee had failed to explain as to why any entity working in different cities would take so much pain in arranging bogus entry of LTCG without any benefit. In this regard, the Assessing Officer relied on what was unearthed on search/seizure operations conducted by the department in suchlike cases, including admissions by promoters/Directors of penny stock companies, share brokers to have provided bogus entries of LTCG in lieu of commission. 54. In this regard, Learned CIT(A) simply relied on decision by Co- ordinate Bench, ITAT, Jaipur Bench in the case of Vigyan Lodha, ITA No.169/JP/2022. In said decision, it was observed that the issue was consequential to the issue of LTCG claim and that since a finding was recorded that transaction of purchase and sale of shares and consequential LTCG could not be treated as bogus, the addition on account of notional commission was not sustainable, being consequential. 55. Herein, as noticed above, for the reasons recorded by us, the main addition made by the Assessing Officer has been sustained. 56. Learned CIT(A) without narrating or discussing the facts of present case observed that the decision by the Co-ordinate Bench was applicable Printed from counselvise.com 36 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. to the facts of this case. How could Learned CIT(A) so observe when he did not narrate the facts of this case or compare the same with the facts in the decision by the Co-ordinate Bench, even while dealing the main addition? 57. When LTCG claim has been held to be bogus are based on sham transactions, there is no merit in the contention raised on behalf of the assessee that no such addition on account of payment of commission could be made. There is no explanation from the side of the assessee as to why any person or entity would provide suchlike accommodation entry without any charges, say commission herein. Result 58. As a result, the impugned order by Learned CIT(A) deleting the consequential addition of the amount of commission of Rs. 1,42,604/-paid by the assessee, deserves to be set aside. Result 59. Consequently, the appeal filed by the Revenue is partly allowed as regards the abovesaid two additions made by the Assessing Officer by Printed from counselvise.com 37 ITA No. 390/JPR/2023 Vijeta Lodha, Jaipur. confirming the same. Assessing Officer to make re-calculations in view of this decision, and in accordance with law. File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 19/11/2025. Sd/- Sd/- ¼xxu xks;y½ ¼ujsUnz dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 19/11/2025 *Santosh vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- JCIT(OSD), Jaipur. 2. izR;FkhZ@ The Respondent- Vijeta Lodha, Jaipur. 3. vk;djvk;qDr@Theld CIT 4. vk;djvk;qDr@CIT(A) 5. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZQkbZy@ Guard File ITA No. 390/JPR/2023) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar Printed from counselvise.com "