NITIN GARG HUF,NEW DELHI V. ITO WARD - 29(4), NEW DELHI

ITA 302/DEL/2020

AI Insights

The case revolves around an appeal by Nitin Garg, HUF against the order of the Commissioner of Income-tax (Appeals)-XXV, New Delhi, which upheld the additions made by the Income Tax Officer (ITO), Ward-29(4), New Delhi. The additions were made on the grounds that the capital gains declared on the sale of shares of Goldline International Finvest Ltd were not genuine and thus not exempt under section 10(38) of the Income Tax Act, 1961. The ITO had disallowed the exemption claiming the gains were unrealistic and not supported by the financials of the company. The Tribunal, after examining the facts and relevant legal precedents, concluded that the transactions were genuine and the gains were rightly claimed as exempt.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314631 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Other Referred Cases: Principal Commissioner of Income Tax - 12, Delhi Vs Krishna Devi, PCIT versus Karuna Garg
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: SALIL AGGARWAL
• Keywords: Capital Gains; Accommodation entries; Penny stocks; Bogus
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: E : NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.302/Del/2020 Assessment Year: 2015-16 Nitin Garg, HUF, 41-A, Pocket-9, Kalka ji Extension, New Delhi – 110 019. PAN: AAFGB5385N Vs ITO, Ward-29(4), New Delhi. (Appellant) (Respondent) Assessee by : Shri Salil Aggarwal, Sr. Advocate; Shri Shailesh Gupta, Advocate; & Shri Madhur Aggarwal, Advocate Revenue by : Shri Amit Katoch, Sr. DR Date of Hearing : 21.04.2025 Date of Pronouncement : 09.05.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the Assessee against the order dated 14.11.2019 of the Commissioner of Income-tax (Appeals)-XXV, New Delhi (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.10145/19-20 arising out of the appeal before it against the order dated 21.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ITO, Ward-29(4), New Delhi (hereinafter referred to as the Ld. AO). ITA No.302/Del/2020 2 2. Heard and perused the records. The appellant declared capital gain of 44,22,027/- on sale of shares of Goldline International Finvest Ltd which has been claimed exempt U/s 10(38) of the Act). The same wase disallowed and the addition of Rs.44,22,027/- was made u/s 68 of the Income Tax Act and also of Rs 88,440/- u/s 69C, being commission @2% on 44,22,027/-. The scrip of M/s Goldline International Finvest Ltd. was purchased in month of April, 2013 and was sold in the month of May & My 2014. On perusal of the details filed by the assessee, it is found that assessee has Long term Capital Gains on:- Purchase Transactions Share script Date of Purchase Total No. of shares Purchas e price Price Mode of payment Purchase value Sharespur chased from Goldlinelnrternational Finvest Ltd. 15.04.2013 50000 Rs. 10.00 Cheque Rs. 5,00,000/- Directly from Company Sale Transat ;tions Script Date of Sale Total No. of shares Sales Sold Price Mode of payment Sale value Shares sold through broker Goldline International Finvest Ltd. 27.05.2014 3500 Rs. 442.00 Cheque 15,47,000/ - M/s Share India Securities Ltd. Goldline lnternational Finvest Ltd. 08.07.201 4 3000 Rs. 495.50 Cheque 14,86,512/ - M/s Share India Securities Goldline lnternational Finvest Ltd. 15.07.201 4 3000 Rs. 494.40 Cheque 1483,515- M/s Share India Securities Ltd. ITA No.302/Del/2020 3 3. On analysis of LTCG transaction, the details of profit earned from sale purchase transactions are captioned here under: - Scrip Purchase Date (by value of stock used in calculate- on Demat a/c credit date * Purcha- se consid- eration Sale date (by value of stock used in calculation) Demat a/c debit date Price Net gain or loss Goldline Internatio- na1 Finest 15.04.201 3 15.04.201 4 50,000 27.05.2014 27.05.2014 Rs. 442.00 15,47,000/ 08.07.2014 08.07.2014 Rs 449.50 14,86,512/ 15.07.2014 15.07.2014 14,83,515/ Total 45,17,027/ 4. Ld. AR has submitted that both the purchase of share as well as sale is genuine and submitted that said equity shares of Goldline International Finvest Ltd have been purchased through banking channel (and the said shares have not been purchased through cash. The Investment have not been made in shares during A Y 2015-16 but during A Y 2014-15. The shares are dematerialized with National Securities Depository Ltd (NSDL). The appellant sold 9500 equity shares of Goldline International Finvest Ltd out of 50000 equity shares purchased during A Y 2014- 15 and the shares have been sold through SEBI registered broker M/s Share India Securities Ltd and the said broker is also registered with BSE, NSE and MCX and there is no allegation against said broker. The shares have been sold on 27/05/2014, 08/07/2014 and 15/07/2014 through Bombay stock exchange through screen-based system and there was no ITA No.302/Del/2020 4 manual interference. The shares so sold have settlement number and contract note number generated through Bombay Stock exchange. The said sales of shares of Goldline International Finvest Ltd were also subjected to securities transaction tax STT on sale. The entire sale proceeds were received through cheque and duly found credited in the bank account of the assessee and the same have been admitted by the learned Assessing officer in of assessment order. Ld. AR submitted that there is no document or allegation that the assessee delivered cash in exchange of the sales price received through cheques. The sale price as on the date of transaction is also the prevailing price in the stock exchange. Hence it is not a case of the Assessing Officer that the assessee has shown an inflated sale price which is not as per the prevailing market price of the shares of M/s Goldline International Finvest Ltd. No adverse inference has been made by the learned AO in respect of balance investment of equity share of 40500 equity shares of Gold line International Finvest Ltd which is being hold as on 31/03/2015 by the appellant 5. Ld. DR has relied the orders and we find that the exemption in respect of long-term capital gain on sale of shares were denied on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. The Id AO observed that price of share of Gold Line International Finvest Limited increased manifold by 4955% which is not supported by the financials and appellant earned unrealistic return. ITA No.302/Del/2020 5 6. Further we find that Hon’ble Delhi High court in the case of Principal Commissioner of Income Tax - 12 , Delhi Vs Krishna Devi ITA no 125/2020 dated 15/01/2021 examining issue related to capital gain on sale of shares of alleged penny stock Gold Line International Finvest Limited, had held it to be a genuinely traded scrip. In the para no 11 of Judgement Delhi High court observed as under: - “11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. ITA No.302/Del/2020 6 He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels. ” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.” 7. Further in PCIT verus Karuna Garg ITA 477/2022, by relying the order in Krishna Devi (supa) has by order dated 23/11/2022 again reiterated transactions in this scrip to be genuine. That being the state of affairs the impugned addition cannot be sustained. The grounds are allowed. The appeals stands allowed. Order pronounced in the open court on 09.05.2025. Sd/- Sd/- (S. RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 09th May, 2025. ITA No.302/Del/2020 7 dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "