AI Insights
The case revolves around the appeal by Mohammad Anish Hingora against the order of the Commissioner of Income Tax (Appeals), which sustained the addition of Rs. 65,64,741/- as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Income Tax Officer, who treated the sale proceeds from shares of M/s. Karma ISP and M/s. Praneta Industries Ltd as bogus accommodation entries. The assessee contested that the transactions were genuine and supported by documentary evidence, which was neither disproved nor controverted by the Assessing Officer. The Tribunal, after considering the submissions and various judicial precedents, ruled in favor of the assessee, highlighting the lack of evidence for any manipulation or rigging of share prices.
Appeal Details
Counselvise Citation
[2024] 140 COUNSELVISE.COM (IT) 472224 (ITAT-RAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 1 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-11-2024
Appeal Filed By
Assessee
Order Result
Allowed
Next Hearing Date
24-09-2024
Assessment Year
2012-2013
Appeal Filed On
19-10-2023
Judgement Text
" आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM (ITA No. 316/RPR/2023) (Assessment Year: 2012-13) आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [in short, “CIT(A)”], passed u/s 250 of the Income Tax Act, 1961 (in short, ‘the Act’), for the AY 2012-13, dated 23.08.2023, which in turn arises from the order of the Income Tax Officer, Ward-3(3), Raipur passed u/s 144 r.w.s. 147 of the Act, dated 23.12.2019. Mohammad Anish Hingora, H.No.858, Sector-3, Near Paras Nagar, Raipur, Chhattisgarh-492001 V S Income Tax Officer-3(3), C.R. Building Civil, Raipur, Chhattisgarh-492001. PAN: AEXPH0543J (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से / Assessee by : Shri Sunil Kumar Agrawal, CA. राजˢ की ओर से / Revenue by : Dr. Priyanka Patel, Sr. DR. सुनवाई की तारीख / Date of Hearing : 24.09.2024 घोषणा की तारीख / Date of Pronouncement : 21.11.2024 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 2 2. The grounds of appeal raised by the assessee along with additional grounds in the present appeal are extracted as under: “1. That, the Id CIT(A) has erred in sustaining the addition of Rs.65,64,741/- in respect of sale proceeds of shares of M/s. Karma ISP & M/s. Praneta Industries Ltd, treating it as a bogus accommodation entry, claimed as exempt u/s 10(38), while, (a) the documentary evidences submitted to prove the LTCG of Rs.65,64,741/- on sale of shares have neither been controverted nor disproved by the ld AO. (b) the ld AO has not brought anything on record to prove that the assessee had routed her own unaccounted money in garb of LTCG. 2. That, on the facts and circumstances of the case and in law, PCIT has not cared/not pointing out the mistake in the ‘Proforma of approval’ that Jt. CIT has also given his approval who is not the appropriate authority u/s 151(1); the legislature had prescribed such ‘Standard Proforma’, clearly demarcating and defining the circumstances under which the approval had to be granted by Jt. CIT and the PCIT; the said defined circumstances cannot be rendered ostios by obtaining approval from both Jt. CIT as well as PCIT; impugned approval u/s 151 is invalid, as held in Kalpana Shantilal Haria (2017) (Bom). 3. That, on the facts and circumstances of the case and in law, approval granted by PCIT u/s 151(1) is invalid as it is mechanical, routine & casual manner without application of mind; it is ritualistic and formal rather than meaningful; in absence of any subjective satisfaction recorded; reopening u/s 147/148 is invalid and is liable to be quashed. 4. The appellant craves leave, to add, urge, alter modify or withdraw any ground/s before or at the time of hearing.” Additional Ground No.1 “1. On the facts and circumstances of the case and in law, reasons are wrongly recorded for alleged escaped income of Rs.33,19,200 on alleged sale consideration of Rs.33,19,200 on sale of shares of ‘Karma ISP’, which is without verifying the information received; on borrowed satisfaction without application of mind by the AO; while, sale consideration was Rs.36,05,644 and LTCG of Rs.31,62,724 on shares of ‘Karma ISP’ claimed exempt u/s 10(38); it is only ‘reasons to suspect’; in absence of ‘reasons to believe’ recorded by the AO as mandated by law u/s 147, reopening u/s147/148 would be invalid and bad in law and is liable to be quashed. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 3 2. On the facts and circumstances of the case and in law, reopening u/s 148/147 is invalid as ‘formation of believe’ made by the AO for escaped income of Rs.33,19,200 is based on ‘unverified information’ of sale consideration of Rs.33,19,200 which is not of the assessee which ‘sold’ or gained by him in any manner; there is no material with the AO for making alleged ‘believe’ for Rs.33,19,200; it is only ‘reason to suspect’ merely for verifying the facts; in absence of ‘ reason to believe’ as a valid jurisdiction u/s147, reopening u/s148/147 would be invalid; liable to be quashed; relied on Mohan Champalal Jain (2019) (Bom) & (SC); Shashi Mohan Gard (2023) (Del HC); Chandani J Ahuja (2024) (Bom); Sheetal Dushyant Chaturvedi (2022) (Bom) &(SC); Smt Sudesh Rani (2023) (Chd-Trib); Jai Prakash Gupta (2021)(Kol-Trib); Mumtaz Haji Mohmad Memon (2018)(Guj); Meenakshi Overseas (P) Ltd (2017) (Del HC). 3. On the facts and circumstances of the case and in law, approval granted u/s 151(1) by PCIT is invalid as PCIT has not cared that the AO notes in the reasons recorded that LTCG earned by the assessee at Rs.65,64,741/-; he continued to hold that escaped income would be Rs.33,19,200; there is nothing in the ‘reasons’ that would show how the AO has reached a figure of Rs.33,19,200; approval granted on wrong reasons based on unverified information; it is complete non application of mind by the PCIT while granting such mechanical approval u/s 151 would be invalid in the eyes of law; in absence of a valid approval u/s 151(1), reassessment made u/s 147 would be invalid and liable to be quashed; relied on Kalpana Shantilal Haria (2017) (Bom). 3. Brief facts of the case as stated are that the assessee, who is an individual had filed his return of income for the AY 2012-13, declaring a total income of Rs.2,72,680/- on 30.03.2013. The case of assessee, thereafter, was re-opened u/s 147 of the IT Act. Notice u/s 148 of the IT Act was issued on 16.03.2019, in response, return u/s 139/148 of the IT Act was filed on 08.05.2019. Statutory notices u/s 143(2) and 142(1) were issued. Further, to investigate into the facts of the case, summon u/s 131 of the IT Act was issued on 13.12.2019 and the assessee was requested to attend the proceedings on 16.12.2019. On the date of hearing at 12:45 pm, the statement of the assessee on oath had been recorded in the office of Ld. AO. The reason for ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 4 re-opening has been initiated, was that the assessee had sold shares of M/s Karma ISP(Karma) for the relevant year, which is identified as penny stock by the Directorate of Investigation Wing, Kolkata. In the course of reassessment proceedings, it is further emerged that another stock, namely, M/s Praneta Industries Ltd. (Praneta) is also in the nature of penny stock and the assessee concerned had transacted in the shares of ‘Praneta’ to the extent of Rs. 38,26,217/-. 4. Based on the aforesaid information, ld. AO described the modus operandi adopted by the penny stock companies and the investors therein. Ld. AO further scripted the assessment order with analysis of financials of ‘Karma’, had concluded that the company is a penny stock company and the assessee had made such investments for booking of bogus Long Term Capital Gain/ Loss. 5. Ld. AO also brought on record the statements of directors/brokers of the similar penny stock companies recorded by the investigation wing, Kolkata, Income Tax Department. In the process of investigation, so as to verify the creditworthiness of the impugned companies, Ld. AO issued notice u/s 133(6) of the IT Act to ‘Karma’, ‘Praneta’, stock brokers M/s. Shahrukh N. Tara, Mumbai and Swastika Investment Ltd, Indore, MP, however, no response from any of the aforesaid parties were received by the ld. AO, therefore, the ld. AO decided the issue against the assessee with the observations that the transactions of purchase ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 5 and sale of the shares, carried out by the assessee are sham and aimed only to bring unaccounted money back in the guise of exempted long term capital gains. As per Ld. AO, in fact, the assessee’s own money was introduced and brought back for claiming capital gain of the on gross sales of Rs.65,64,741/- received by the assessee from ‘Karma’ and ‘Praneta’, therefore, were treated as assessee’s own undisclosed fund routed through these medium. Finally, the assessment was completed with the aforesaid addition and the taxable income of the assessee has been computed at Rs.68,37,420/-. 6. Aggrieved with the aforesaid addition by the ld. AO, the assessee preferred an appeal before the ld. CIT(A), wherein, elaborated contentions were raised by the assessee to establish that the transactions carried out by the assessee in terms of the purchase and sales of shares of ‘Karma’ and ‘Praneta’ are genuine, the same cannot be brought within the compass of bogus transaction. However, the ld. CIT(A) had not found any substance in the submission / contentions of the assessee, therefore, he dismissed the appeal of the assessee and sustained the addition made by the Ld. AO. 7. Dissatisfied with the order of ld. CIT(A), the assessee herein had resorted to the remedy available by way of filing an appeal before the ITAT, therefore, the present appeal has been instituted, which is under consideration. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 6 8. At the outset, in order to explain the impugned transactions regarding the purchase / sale of share of ‘Karma’ and ‘Praneta’, Shri Sunil Agrawal, Chartered Accountant, the Authorized Representative of the assessee (in short “Ld. AR”), submitted that the order of Ld. CIT(A) contains errors qua the appreciation of facts and interpretation of law while passing the appellate order. To support his contentions, Ld. AR furnished before us a written submission dated 17.09.2024, which is extracted hereunder for the sake of completeness of facts and better interpretation of the issue: ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 7 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 8 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 9 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 10 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 11 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 12 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 13 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 14 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 15 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 16 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 17 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 18 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 19 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 20 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 21 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 22 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 23 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 24 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 25 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 26 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 27 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 28 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 29 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 30 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 31 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 32 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 33 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 34 ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 35 9. Based on the aforesaid submission, it was the prayer that the order of Ld. CIT(A), NFAC, dated 23.08.2023 was under misappreciation of the facts and bad in law, therefore, the same needs to be set aside and the additions made by Ld. AO are liable to be vacated. 10. Dr. Smt. Priyanka Patel, the Senior Departmental Representative (in short “Ld. Sr. DR”), contradicting the contentions raised by the Ld. AR had submitted that as per question no. 4 from the statements of assessee recorded on ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 36 16.12.2019 u/s 131 of the Act, the assessee has admitted that the share of ‘Karma’ & ‘Praneta’ were purchased by making the payment in cash. It is also discernible that the shares of Karma were purchased for Rs. 4,42,920/- on 06.02.2010 and shares of ‘Praneta’ are purchased for Rs. 4,24,200/- on 12.01.2010 and 18.01.2010, whereas such shares were sold with huge and abnormal gain within a short span of time by the assessee on sale consideration of Rs. 36,05,644/- and Rs. 38,26,217/-, respectively. In view of such facts, as the assessee herein had booked exorbitant profit in the garb of Long Term Capital Gain which does not commensurate with the financials and credentials of the impugned companies, therefore, the Ld. AO, after demonstrating the financials of the penny stock company, relying on the information received from investigation wing, Kolkata and in absence of any response by the concerned parties to whom notices for investigation u/s 133(6) were issued, had rightly made the addition treating the amount received as undisclosed funds of the assessee by adding such amount to the income of assessee under the relevant provisions of I.T. Act. Ld. Sr. DR further placed his reliance on the order of Ld. CIT(A), and have submitted that the Ld. CIT(A), had exhaustively dealt with the contentions of the assessee, considered the facts and circumstances of the case and have dismissed appeal of the assessee under proper appreciation of the transactions and have decided the issue according to the mandate of law. It was, therefore, the prayer that the order of Ld. CIT(A) deserves to be upheld. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 37 11. We have considered the rival submissions, perused the material available on record and the judgments relied upon by the parties. 12. On merits, the Ld. AR on behalf of the assessee had raised multiple contentions. The first contention of the Ld. AR is that the sale proceeds received from the sale of investment in shares cannot be added u/s 68 as unexplained cash credit, as it had already been shown in computation of income with ROI as income on sale of shares, claimed exempt u/s 10(38). It is also added that once the amount has been shown as income under the head Long Term Capital Gain and claimed as exempt u/s 10(38) of the Act, addition of the same will be tantamount to double taxation or double addition. To support such contention, Ld. AR placed his reliance on the order of coordinate bench of ITAT, Mumbai in the case of Vikram and Chandan vs ITO, reported (2024) 165 Taxmann.com 340 (Mum-Trib). The relevant findings from the said decisions are culled out as under: 8. We note that Id. Assessing Officer has observed about the so-called purchasers of shares sold by the assessee who have not been identified even though notices were issued u/s. 133(6) of the Act. In this context, it is worth noting that impugned share sale transactions undertaken by the assessee are on the online digital trading platform of stock exchange of BSE which is a regulated market under the aggies of a regulator viz. SEBI. There is nothing on record from the market regulator SEBI for the relevant period which establishes the 'tainted' status of the scrip involved in the present case, so as to hold the share sale transactions as bogus/accommodation entry as alleged by the Id. AO. It is important to note that the operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Further, sale proceeds are received through the stock market ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 38 process into the pre-identified bank account of the seller i.e., the assessee which cannot be tainted as 'unexplained or unaccounted or undisclosed' money for the addition made u/s. 68 by the Id. Assessing Officer. 8.1 Section 68 of the Act essentially requires the assessee to explain the nature and source of the sum credited in his books of account to the satisfaction of the Id. Assessing Officer. Time and again, Hon'ble Courts have held the requirement of establishing the identity and creditworthiness of the party and genuineness of the transaction to meet the said requirements of section 68. In the present set of facts, as already stated above, operations and modus operandi of the regulated stock markets (BSE) does not anyway provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness Meeting this requirement is an act of impossibility of performance expected from the assessee for the transaction executed on SEBI regulated, digitally operated stock exchange. For the third limb of genuineness of the transaction, sale proceeds are received through the stock exchange process into the preidentified bank account of the seller i.e., the assessee. Further, it is not a case of mere boo entry where a possibility of tainting it as bogus or sham exists but it is a case where actual movement of dematerialized shares has taken place from the DMAT account of the assessee. Furthermore, the said shares are being currently traded on the stock exchange as demonstrated by the assessee from the screen shot of the website of www.bseindia.com dated 29.05.2024 at Rs. 20.42, furnished at the direction of the bench. In our considered view, assessee cannot be put to the rigors of section 68 in respect of sale proceed received for sale of shares on the stock exchange (BSE). 13. Another decision relied upon is ACIT vs Pradeep Kumar Agrawal, reported (2016) 159 ITD 54 (Chd), wherein the coordinate bench of the ITAT, Chandigarh while deliberating on the issue has observed as under: 19. There is another aspect of this case that the assessee has sold shares at Rs. 2,89,43,383, the cost of acquisition of which was Rs. 21,87,675. The long-term capital gain arising on the said transaction was Rs. 2,67,55,708, which was shown by the assessee in his computation of income and was claimed as exempt under s. 10(38) of the Act. The AO has made the addition of Rs. 2,67,55,708 stating the same to be added under s. 68 of the Act. We do not find this action of the AO to be as per law. Sec. 68 of the Act provides for addition ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 39 of any amount appearing to be credited to the assessee in his books of account during the year in case the AO is not satisfied as to the genuineness of the same. The credit appearing in assessee's account is an amount of Rs. 2,89,43,383 by disallowing the exemption under s. 10(38) of the Act at Rs. 2,67,55,708 claimed by the assessee. The AO is not justified in invoking the provisions of s. 68 of the Act. This also amounts to double taxation or double addition of the income in view of the fact that the same amount has actually been shown by the assessee as his income in his computation of income though the same has also been claimed as exempt under s. 10(38) of the Act. In view of the above, the action of the learned CIT(A) in deleting the addition is justified and is hereby upheld. 20. Before concluding the issue, we would like to deal with two more contentions of the Department in the grounds of appeal raised in the present appeal. Firstly, there is a mention of applying the test of human probabilities as propounded in the judgments of the Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) and Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 214 ITR 801 (SC) . We are aware of the proposition laid down by the Hon'ble Supreme Court and we humbly bow down before the same. However, in the facts and circumstances of the present case in the face of numerous documentary evidences crying for bona Tide of the assessee as against only suspicion and surmises in favour of the Department, we do not hesitate to hold that the proposition laid down by the Hon'ble Supreme Court is not applicable in the present case. Even the AO has not been able to bring on record any adverse material, on his own investigations, the results have been in favour of the assessee. Suspicion, howsoever strong, cannot take part of the documentary evidences. second contention of the Department with respect to the prices being manipulated and later on the company delisted from the stock exchange, we want to add that the company was very much in existence at the time of ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 40 transaction and whatever happen later on is of no relevance. The grounds of appeal raised by the Revenue are dismissed. 14. The second contention raised by the Ld. AR is that the assessee’s name was not mentioned in the investigation report which is relied upon by the revenue or in the statement of alleged entry operators, further there was no allegation or evidence brought on record by the revenue to establish that the assessee concerned, or his broker was involved in the alleged price rigging, while undertaking the transactions of purchase/ sale of the impugned shares. On this issue, reliance has been placed on the following judgments: Renu Agrawal (2023) 153 taxmann.com 578 (Allahabad) 5.After detailed discussion, the ITAT has recorded the following findings of facts: \"The above findings recorded by Id. CIT(A) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the ld. CIT(A) has specifically that there is no adverse comment in the form of general and specific statement by the Pr. Officer of stock exchange by the company whose shares were involved in these transactions, and he held that Assessing Officer only quoted facts pertaining to various completely unrelated persons whose statement were recorded and, on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the investigation Wing. The Id. CIT(A) relying on various orders of Lucknow Benches and other Benches has allowed relief to the assessee by placing reliance on the evidence filed by the assessee before Assessing Officer. I do not find adversity in the order of ld. CIT(A) specifically keeping in view the fact that Lucknow Benches in a number of case after relying on the judgment of Hon'ble Delhi High Court in the case of Krishna Devi and others had allowed relief to various assessees.\" ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 41 Ziauddin A Siddique (2022) ITA No. 2012 of 2017 (Bom HC) 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 (\"STP') 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. Parasben Kasturchand Kochar (2021) 130 taxmann.com 177 (SC) 2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:- \"9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain. 10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee. 11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee.\" ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 42 3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income-tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant. 4. We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under section 260-A of the Act, 1961. Nilesh Jain (HUF) (2024) 163 taxmann.com 229 (MP HC) 12. Learned counsel for the respondent further contended that mere sudden increase in share prices on the stock exchange, does not ipso facto determine that shares are bogus, if the shares are bogus, then these shares cannot be listed and traded on stock exchange through D-MAT accounts. Therefore, it is incorrect notion of the Revenue that these shares are bogus shares, on the contrary these shares are genuine and lawfully issued share by the company by following the law and procedure in this regard. The Assessing Officer has heavily relied upon report of Investigation Wing of Income Tax Department which was conducted in Kolkata in case of some of the Companies including M/S. Sunrise Asian Limited. This report has never been provided to the respondent at any stage of the proceedings nor filed by the department before ITAT or before this Court. It is settled law that no material can be used against the assessee without providing the assessee to examine it and, if required, to cross examine. Thus, there was violation of principles of natural justice. That on similar set ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 43 of facts and in respect of the same share script of M/S Sunrise Asian Ltd. the Mumbai Bench of ITAT in case of (l) Narayan Ramchandra Rathiv. ITO[ IT Appeal No. 4811 (Mum.) of 2018, dated 8-8-2019] (Page nos.50 to 61), (2) Dipesh Ranmeshchandra Vardhan (Supra) (Page nos. 62 to 71) and, (3) Anraj Hiralal Shah v. ITO [IT Appeal No. 4514 (Mum.) of 2018, dated 16-7-2019] (page nos. 72 to 74) has dealt with the identical issue and decided in favour of the assessees. 13. Learned counsel for the respondent further submitted that as many as three High Courts i.e. Delhi High Court, Bombay High Court and Gujarat High Court also have dealt with the similar issues and has dismissed the appeal filed by the Revenue. The appellant (Revenue) had preferred SLP against an order of Gujarat High Court passed in the case of the Principal Commissinoer of Income Tax-I v. Parasben Kasturchand Kochar [2021] 130 taxmann.com 176, passed in R/TAX Appeal No.204 of 2020 decided on 17.09.2020), which has been dismissed in limine upholding the orders passed by the Gujarat High Court. The Apex Court in the case of Principal Commissioner of Income Tax v. Smt. Krishna Devi [2021] 126 taxmann.com 80/279 taxman 148/431 ITR 361 (Delhi). decided on 15.01.2021 has held that the High Court has erred by holding that the addition made under Section 68 of the Act by treating impugned Long term Capital Gain (LTCG) as bogus was unjustified and same was to be deleted. Mamta Rajeev Kumar Agrawal (2023) 155 taxmann.com 549 (Guj HC) 4. Hence, the Tribunal held, and in our opinion rightly so that there was no evidence available on record suggesting that the assessee or his broker was involved in rigging up of the price of the script of M/s Shree Nath Commercial & Finance Ltd. The assessee had acted in good faith. The Tribunal, therefore, correctly held that the Assessing Officer had acted only on assumption which was misconceived. The CIT(A) order dismissing the revenue's appeal was confirmed. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 44 Prempal Gandhi (2018) 94 taxmann.com 156 (P & H HC) 4. The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 at Rs. 11/- and sold the same in the assessment year 2008-2009 at Rs. 400/- per share. In the above case, namely, Hitesh Gandhi (supra) also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees' income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees' income from undisclosed sources. In Hitesh Gandhi's case (supra) also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. Smt. Pooja Agrawal (2018) 99 taxmann.com 451(Raj HC) 12. However, counsel for the respondent has taken us to the order of CIT(A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under:— \"Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce & Ind. Ltd., assessee's account with P.K. Agarwal & co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 45 ofNSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohit Group. The AO has also stated in the assessment order itself while discussing the modus operandi that accommodation entries of long term capital gain were purchased as long term capital gain either was exempted from tax or was taxable at a lower rate. As the appellant's case is of short term capital gain, it does not exactly fall under that category of accommodation transactions. Further as per the report of DCIT, Central Circle-3 Sh. P.K. Agarwal was found to be an entry provider as stated by Sh. Pawan Purohit of B.C. Purihit and Co. group. The AR made submission before the AO that the fact was not correct as in the statement of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all the material facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohi. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non- genuine. Consequently, denying the claim of short term capital gain made by the appellant before the AO is not approved. The AO is therefore, directed to accept claim of short term capital gain as shown by the appellant.\" ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 46 15. In backdrop of the aforesaid judgments, our interpretations to the facts and circumstances of the present case are that, admittedly certain transactions of investment in shares and thereafter selling of such investments are carried out by the assessee. 16. From the facts on record, undisputedly, it is evident that the assessee had purchased 12,000 shares of ‘Karma’ on 06.02.2010 for Rs. 4,42,920/- i.e., @ Rs. 36.91 per share, these shares were sold by the assessee at an average of Rs. 300.47 per share for Rs. 36,05,644/-, the investments are disposed off in parts on 07.06.2011 (3000 shares @277.55 per share), 07.07.2011(3000 shares @317.07 per share) & 09.07.2011(6000 shares @303.63 per share) and have obtained capital gain of Rs.31,62,724/- (Rs. 36,05,644 - Rs. 4,42,920) i.e., 714% on the cost of investment. 17. Similarly, 60,000 shares of ‘Praneta’ are purchased on 12.01.2010 for Rs. 4,24,200/- i.e., @ Rs. 7.01 per share, these shares were sold by the assessee @ an average of Rs. 63.77 per share for Rs. 38,26,217/-, the investments are disposed of in parts on 07.06.2011 (30000 shares @62.36 per share), 07.07.2011(6000 shares @63.05 per share) & 14.07.2011(24000 shares @65.71 per share) and have obtained capital gain of Rs.34,02,017/- (Rs. 38,26,217- Rs. 4,24,200) i.e., 801.98% on the cost of investment. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 47 18. From the above facts, it is emanating that the assessee has sold the shares of aforesaid companies within a span of approx. 1 year 5-6 months and have attained a profit of 700% to 800%, which prima facie has been exorbitant. The aforesaid facts are duly acknowledged by the assessee during his statements recorded on oath under the provisions of section 131 of the Act. 19. Coming to the issue that whether the assessee had discharged the onus cast upon him qua furnishing the details to substantiate the genuineness of the transaction. Herein on perusal of the order of Ld. AO, Ld. CIT(A) and material on record, evidently, during the assessment proceedings assessee attended the office of Ld. AO and have given statements, also have filed reply and necessary documents like ITR, Computation of Income, Balance Sheet, copy of D-Mat Account, details of Sale / Purchase of shares of ‘Karma’ & ‘Praneta’, Contract Note cum Bill of registered share brokers, Bank Statement of the assessee etc. Therefore, it cannot be said that there was any failure on the part of assessee in furnishing the primary and requisite information for the assessment before the Ld. AO. 20. The allegation of revenue qua the purchases which are made in cash is not tenable at this stage, for the reason that there was no objection by the Ld. AO, who had made the addition of amount of capital gain only, thus, impliedly accepted the genuineness of the purchases. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 48 21. As all the corroborative evidence supporting genuineness of purchase / sale of the impugned stocks are duly furnished by the assessee against which no discrepancies has been pointed out by the Ld. AO or by the Ld. CIT(A), therefore, the allegation that, the assessee cannot escaped from the burden cast upon him, which unfortunately in the present case are heavy as the facts established that the shares which were traded by the assessee had phenomenal and fanciful rise in the price in a short span of time i.e., within 17-18 months, does not considered to be appropriate. 22. Herein, we may observe, drawing support from the decision of Hon’ble Allahabad High Court in the case of PCIT vs Renu Agrawal (supra), wherein Hon’ble Court has held that dehors any adverse comment from the stock exchange and officials of the company involved in the impugned transactions and no material relating to assessee was found in the investigation wing’s report, addition made by Ld. AO cannot be sustained. The order of Hon’ble Allahabad High Court is decisive in the present case, as the same was challenged through a SLP by the revenue before the Hon’ble Apex Court, but the same was dismissed. 23. Under similar situation Hon’ble Mumbai HC in the case of Ziauddin A. Siddique (supra) have affirmed the findings of Tribunal that if the transaction of purchase / sales of shares of the alleged penny stock is done through stock exchange and through registered stock brokers, the payment is made through ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 49 banking channel and the Stock Transaction Tax (STT) has been paid, the Assessing Officer has not criticised the documentation involving the sale / purchase, also there is no allegation against the assessee that it has participated in any price rigging in the market on the impugned shares. 24. Similar findings are accorded by Hon’ble Gujarat HC in the case of Mamta Rajeev Kumar Agrawal (supra), wherein their lordships have observed that, if there is no evidence available on record suggesting that the assessee or his broker was involved in rigging up of the price of the impugned script, the assessee had acted in good faith, then the action of Assessing Officer was only on assumption and misconceived. 25. Hon’ble MP High Court in the case of Nilesh Jain HUF (supra), have held that mere sudden increase in share price on the stock exchange does not ipso facto determine that the shares are bogus, their lordship in this judgment have even observed that, if the shares are bogus then these shares cannot be listed and traded on stock exchange through D-Mat Accounts. Therefore, it is incorrect notion of the revenue in treating such shares as bogus. The Assessing Officer has heavily relied upon report of investigation wing, which was never provided to the respondent at any stage. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 50 26. Apropos, high appreciation in the value of shares Hon’ble P&H HC in the case of PCIT vs Prem Pal Gandhi (supra), has held that, though appreciation of value of shares sold by the assessee was very high, if the same was traded in NSE and receipt of sales routed through bank and company whose share were sold was not a closely held company, no addition could be made as undisclosed income. 27. Further, Hon’ble Supreme Court have dismissed the SLP of revenue while dealing with the decision of Hon’ble Gujarat HC in the case of PCIT vs Parasben Kasturchand Kochar (supra), wherein it was the finding of Hon’ble HC that, where assessee individual engaged in trading of shares had discharged his onus of establishing LTC gain arising out of sale of shares as fair and transparent by submitting records of purchase bills, sale bills, D-Mat statement etc., same not being earned from bogus companies was eligible for exemption u/s 10(38). 28. In a connected issue, Hon’ble Rajasthan HC in the case of Smt. Pooja Agrawal (supra), has held that, where share transactions were made through D- Mat Account, through stock exchange, payments and receipt were made through account payee cheques, copy of contract note regarding purchase / sale of shares, assessee’s account with share broker, company Master details from registrar of companies had been filed, transaction could not held to be not genuine or mere accommodation entry. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 51 29. Adverting to the facts and circumstances of the present case, as the assessee had furnished all the necessary information in carrying out the transaction of purchase / sale of the shares, though the purchase by the assessee was offline by making the payment in cash but the same was not disputed by the Ld. AO, since the addition was made qua the amount of capital gain only. The documents furnished by the assessee before the Ld. AO to support the genuineness of the transaction are neither criticised nor any discrepancy therein which indicates that the documents are not genuine are pointed out by either of the authorities below. There was an allegation that the assessee failed to discharge the burden cast upon him, however, no explicit observation specifying the fault on the part of assessee in discharging of burden which the assessee was unable to furnish could be brought on record. 30. Ld. CIT(A) also relied on the doctrine of preponderance of human probabilities, placing reliance on certain judicial pronouncements, thus have observed that the rise in price of the share was artificially done by adopting the manipulative practices, the assessee was failed to prove that there was no manipulation, and the gains assessee has reaped was not tainted. It is further observed that the Assessing Officer has adopted an inferential process which is followed by a reasonable and prudent person, Ld. AO culled out proximate facts, considered the surrounding circumstances as enlightened by investigation wing, assessee’s conduct, the time between the buy and sale operation and also the ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 52 sudden and steep rise in the price of shares of the impugned company, whereas the general market trend was admittedly recessive. The aforesaid conviction of the Ld. CIT(A) is found to be bereft of merits, whereas as per settled ratio of law emerging from the orders of various Hon’ble High Courts, wherein revenue’s challenge before the Hon’ble Supreme Court was not considered as a subject of interference thus, has reached finality as of now, accordingly, referring to the facts of present case, wherein the assessee has furnished all the necessary documents to substantiate the genuineness of the transaction which were neither contradicted by the revenue authorities nor any defect in the said documents has been indicated. There is no finding or evidence on record showing assessee’s or his broker’s involvement in rigging of price of the impugned shares, there was no hiding of information about the transactions by the assessee as the claim of exemption u/s 10(38) on LTCG generated has duly been disclosed in the computation of income. Under such circumstances, since sudden rise in the price of share due to which the assessee was benefited, merely on the basis of presumption, inferences, human probabilities cannot be held as bogus transactions. As the transactions are carried out through recognized stock exchange, through registered stockbrokers, therefore, dehors any concrete evidence against the assessee being involved in the manipulative practices the impugned transactions cannot be held as tainted. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 53 31. In view of aforesaid observations, facts and circumstances of the present case, respectfully following the ratio of law laid down by Hon’ble Courts referred to supra, squarely relevant to decide the issues, the addition made u/s 68 by adding the amount of capital gain of Rs. 65,64,741/-, earned by the assessee during the relevant year and claimed as exempted u/s 10(38), on the basis of mere assumptions and inferences without establishing that the assessee is guilty of being involved in price rigging or without establishing that the transactions and corroborative evidence furnished by the assessee are not genuine, cannot be sustained. We, thus, in terms of aforesaid observations direct to vacate the impugned addition of Rs. 65,64,741/- made u/s 68 of the Act. 32. In result, Ground no. 1 of the present appeal of the assessee has been rendered as allowed. 33. As the sole addition of Rs. 65,64,741/- made u/s 68 of the Act by the Ld. AO and confirmed by the Ld. CIT(A), challenged by the assessee has been deleted by us as narrated in the foregoing paras of this order, we, thus, refrain ourselves to deal with the other contentions challenging the validity and legality of the proceedings u/s 147/ 148 and approval u/s 151 assailed by the assessee, the same therefore, left open. 34. In result, the appeal of assessee is allowed, in terms of our observations. ITA No.316/RPR/2023 Mohammad Anish Hingora vs ITO, Ward 3(3), Raipur 54 Order pronounced in the open court on 21/11/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 21/11/2024 Hem आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- 2. ŮȑथŎ / The Respondent- 3. आयकर आयुƅ(अपील) / The CIT(A), 4. The Pr. CIT -1, Raipur, (C.G.) 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 6. गाडŊ फाईल / Guard file. // स×याǒपत Ĥित True copy // "
Other Referred Cases
Kalpana Shantilal Haria (2017) (Bom), Mohan Champalal Jain (2019) (Bom) & (SC), Shashi Mohan Gard (2023) (Del HC), Chandani J Ahuja (2024) (Bom), Sheetal Dushyant Chaturvedi (2022) (Bom) & (SC), Smt Sudesh Rani (2023) (Chd-Trib), Jai Prakash Gupta (2021)(Kol-Trib), Mumtaz Haji Mohmad Memon (2018)(Guj), Meenakshi Overseas (P) Ltd (2017) (Del HC), Vikram and Chandan vs ITO (2024) 165 Taxmann.com 340 (Mum-Trib), ACIT vs Pradeep Kumar Agrawal (2016) 159 ITD 54 (Chd), CIT vs. Durga Prasad More (1973) CTR (SC) 500 : (1971) 82 ITR 540 (SC), Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 214 ITR 801 (SC), Renu Agrawal (2023) 153 taxmann.com 578 (Allahabad), Ziauddin A Siddique (2022) ITA No. 2012 of 2017 (Bom HC), Parasben Kasturchand Kochar (2021) 130 taxmann.com 177 (SC), Prempal Gandhi (2018) 94 taxmann.com 156 (P & H HC), Mamta Rajeev Kumar Agrawal (2023) 155 taxmann.com 549 (Guj HC), Nilesh Jain (HUF) (2024) 163 taxmann.com 229 (MP HC)
Laws Referred To
Income Tax Act, 1961
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