AI Insights
The case revolves around the appeal by Rajendra Kumar Mundra (HUF) against the order passed by the National Faceless Appeal Centre, Delhi, which upheld the additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961, concerning alleged bogus long-term capital gains from the sale of shares of Yamini Investment Company Ltd. The Tribunal examined the procedural and substantive aspects of the case, including the validity of the reopening of the assessment under section 147 and the reliance on statements from entry operators without corroborative evidence. The Tribunal noted that the shares were sold through a recognized stock exchange, and all transactions were documented and traceable through banking channels, which supported the genuineness of the transactions.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 714669 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-08-2025
Appeal Filed By
Assessee
Order Result
Allowed
Assessment Year
2016-2017
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER& SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 1000/Mum/2024 (Assessment Year: 2016-17) Rajendra Kumar Mundra (HUF) C-28, Ameya Bldg, Behind YMCA DN Nagar Andheri (W) 400053. Vs. ITO, Ward 24(3)(1) Piramal Chamber Lalbaug, Mumbai – 400012. PAN/GIR No.AADH6828J (Applicant) (Respondent) Assessee by Shri Vimal Punmiya, CA & Shri Anand Mundra, CA Revenue by Shri Annavaran Kosuri, Sr. AR Date of Hearing 22.07.2025 Date of Pronouncement 06.08.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee challenging the impugned order dt. 08.01.2025 passed u/s 263 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2016-17. 2. All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in upholding the additions made by the AO u/s Printed from counselvise.com 2 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 69A of the Act. Therefore, we decided to adjudicate these grounds through the present consolidated order. 3. Ld. AR appearing on behalf of the assessee relied upon the detailed written submissions filed by him on behalf of the assessee, the same is reproduced herein below: A. Brief facts of the case 1. The assessee is an HUF which earns income from business, income from capital gain and income from other sources. Enclosing: - Copy of Financial Statements (Refer Paper Book Page no. 4-6) 2. The assessee is a regular investor. The same can be verified from the D-MAT holding statement. The assessee has sizable portfolio. The assesse has not only invested in scrips but also in funds. Enclosing: - Copy of D-MAT Account showing holding as on 31.03.2015(Refer Paper Book Page no. 44-47) 3. The assessee has filed return of income for AY.2016-17on 02.08.2016declaring total income at Rs. 8,79,320/- Enclosing: - Copy of ITR Acknowledgement and Computation of Income for AY 2016-17 (Refer Paper Book Page no. 1-3). 4. The case was reopened u/s 147 by issuance of notice u/s 148 of the IT Acton mere information which was received from DDIT (Inv.) Unit in respect of alleged bogus LTCG claimed by the assessee on sale of penny stock script. 5. TheAppellanthad submitted to Ld. AO all documents pertaining to sale and purchase of shares of Yamini Investment Ltd. like D-mat account statement, Allotment advice, copy of broker ledgers, copy of bank statement reflecting payment and receipt of shares purchased and sold Printed from counselvise.com 3 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. and relevant contract notes/sales bills with detailed submission to prove the genuineness of the transaction.(PART OF PAPER BOOK) 6. The Ld. AO stating that the transaction of LTCG is a manipulated transaction done by appellant in connivance with the operators to evade taxes on his unaccounted income and relying on statement made by operators treated the LTCG according to him of Rs.89,80,308/- as unexplained incomeandmade a total addition of Rs. 89,80,308/- under section 68 of the IT Act without considering the documentary evidences submitted by appellant during the assessment proceedings and passed order dated 16.03.2022raising a demand of Rs.1,08,41,421/-. 7. The Ld. CIT(A) as well as the Ld. AO did not do analysis of facts and they only relied on information, without appreciating evidences. Ld. A.O. did not apply his mind and made addition without checking figure with collaborative evidences. 8. Being aggrieved by the aforesaid addition, the assessee (appellant) has filed this appeal before your honor. 9. With regard to the grounds taken by the assessee, we submit ground wise reply- GROUNDS OF APPEAL GROUND NO. 1 to10 1. On facts and in the circumstances of the matter in the law, the Ld. CIT(A) erred in passing the order without considering the merits of the case. 2. On facts and in the circumstances of the matter in the law, the Ld. CIT(A) without giving a reasonable opportunity, wrongly concluded that the appellant has not effectively pursued the appellate proceedings. Whereas every fact of the case was fully explained in statement of facts filed along with Form 35 3. The Ld. CIT(A) erred Long term capital gain of Rs. 89,80,308/- on sale of shares of Yamini Investment Company Ltd. u/s 69A of the Act. 4. The Ld. CIT(A) failed to appreciate that the appellant has submitted evidence supporting the purchase and sale of shares of said company resulting in capital gains of Rs. 89,80,308/- (i.e. 91,80,309 being the sale consideration less Rs. 2,00,000 being the purchase cost) 5. The Ld. CIT(A) erred in not considering the exemption us 10(38) of the Act in respect of LTCG accruing on sale of shares of Yamini Investment Co. Ltd. 6. The Ld. CIT(A) failed to appreciate the fact that the appellants transactions of sale of shares of Yamini had been executed on the BSE, Printed from counselvise.com 4 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. a recognized stock exchange, on which Security Transaction tax (STT) had been duly paid. 7. The Ld. CIT(A) erred in making the addition of sale proceeds on the sale of shares of Yamini us 69A on the basis of mere suspicion and surmises of the Ld. AO, and not based on facts and evidence as he failed to bring any evidence on record supporting the conclusions or controverting the evidence submitted by the appellant. 8. The Ld. CIT(A) erred in findings and conclusions stated in para 8 of the assessment order without any evidence on record, either direct or otherwise. The conclusions are based on presumptions and surmises. 9. The Ld. CIT(A) has denied natural justice to the appellant by not giving opportunity to cross examine the persons on whose statements the Ld. AO has relied. 10. The appellant craves leave to add to, ament, or delete any of the above grounds, if and when required. The appellant beyond any doubt proves the identity, genuineness and credit worthiness of the transactions. A. WHY AO MADE ADDITION i. The Ld. AO on the basis of reopening assessmentin the case u/s 147and by issuing notice u/s 148 dated31.03.2021 based on some information received from DDIT(Inv.)that during investigation carried out in connection with bogus LTCG claimed on penny stocks, it was found that the assessee had also obtained such accommodation entries in the form of bogus LTCG of Rs.89,80,308/-during the FY 2015-16 relevant to AY 2016-17, forming part of the unaccounted income of the assessee. ii. The Ld. AO on the basis of irrelevant materials and statement statements of operator of Yamini Investment Ltd. wherein he has admitted of being a bogus entry provider and has provided bogus LTCG entry.The LTCG shown by the assessee from share transactions is allegedly treated as bogus and added as unexplained cash credit of Rs.89,80,308/-u/s68 of the Act. B. WHY ADDITION MADE BY AO. IS NOT SUSTAINABLE: In AY 2016-17assessee sold shares and booked the Long-Term capital gain. Summary is given as under. THE SUMMARY TO DETAILS, FACTS AND EXPLANATIONS IN THE CHRONOLOGICAL ORDER OF THE TRANSACTIONS OF LONG-TERM CAPITAL GAIN TO ESTABLISH THE GENUINENESS OF THE TRANSACTION EXEMPT UNDER SECTION 10(38) ARE AS UNDER: Printed from counselvise.com 5 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. The assessee is a regular investor in share market since many years. The assessee was not involved into buying of Yamini Investments Company Limited. The flow of transaction was as follows: 1. The Assesseewas alloted20,000 Equity Shares of M/s Anax Com Trade Limited on 21/01/2013 for a value paid amounting to Rs. 2,00,000 (Face value Rs. 10). Enclosing: - Allotment Letter (Refer Paper Book Page no. 48) - Bank Statement highlighting the payment made towards purchase (Refer Paper Book Page no. 49-50) 2. ANAX COM TRADELTD. split the face value of shares from Rs 10 to Rs 1. 3. The assessee was just a small shareholder of Anax Com Trade Limited. 4. On 09/05/2014 the said 2,00,000 shares of Anax Com Trade Ltd were converted, by merger /amalgamation following Bombay High Court Order of Hon. Justice Shri Gautam Patel, to 1,60,000 shares of Yamini Investments Company Limited (Yamini).(Refer Paper book Page no. 51-95) 5. Hence the basic contention that the shares of Yamini Investments Company Limited were purchased is incorrect, as the assessee has come to hold shares of Yamini due to the said court order after many months of purchases of M/s Anax Com Trade Ltd equity shares. 6. The mergerorder of Bombay High Court was followed by approval of SEBI & other government agencies for trading at Bombay Stock Exchange. 7. It was the management of Anax Com Trade Limited who had dealt with Yamini Investment Company Limited. The assessee being as small shareholder had no control over the management of the Anax Com Trade Limited Anax or that of Yamini Investment Company Limited. The assessee is not related to the promoters of the either of the company. 8. In response to the above High Court order of merger of Hon. Justice Shri Gautam Patel the assessee got entitled for 1,60,000 equity shares of Yamini Investments Company Limited, which was lesser than the acquired 2,00,000 shares of Anax Com Trade Limited. 9. Later looking at market volatility & better returns the assessee sold these equity shares at Recognized Bombay Stock Exchange through Brokers namely IIFL Securities Limited and Arcadia Printed from counselvise.com 6 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. Share & Stock Brokers Pvt. Ltdat various rates for total value of Rs.91,89,500/- after STT paid. SN Date of Sale Trade Rate Quantity Amount STT 1 24-07-15 50.75 10,000 5,06,993 508 2 14-06-15 56.25 20,000 11,23,875 1,125 3 25-06-15 58.60 10,000 5,85,414 586 4 26-06-15 58.75 20,000 11,73,824 1,173 5 29-06-15 58.90 15,000 8,82,616 884 6 30-06-15 49.20 25,000 14,71,027 1,473 7 01-07-15 58.90 20,000 11,76,822 1,178 8 13-07-15 57.60 10,000 5,75,424 576 9 16-07-15 56.20 30,000 16,84,314 1686 160,000 91,80,309 9,191 Enclosing: - Copy of Sales Bills issued by the assessee’s brokers for sale of shares at the bolt of BSE. (Refer Paper Book Page no. 96-112) - Copy of Broker Ledgers through whom shares were sold (Refer Paper Book Page no. 113-118) 10. Complete details pertaining to purchases, scheme of court of merger, D-MAT Accounts & sale notes (Broker's note) etc. are enclosed as annexures for your reference. All the payments have been received through stockbroker of recognized stock exchange through banking channels. Enclosing: - Copy of Bank Account Statements (Refer Paper Book Page no. 42- 43& 49-50) 11. Price of script Yamini Investments Company Limited was being determined, at recognized stock exchange, which is not in control of assessee. Even the number of shares held is determined and approved by Hon. Bombay High Court as per the scheme of merger. 12. It is not that assessee is dealing only in one such scrip. The assessee has been a regular investor and earning gains/losses from Printed from counselvise.com 7 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. investing in shares of many companies. No other gain (long term or short term) has been questioned by IT Dept. 13. Further, the assessee humbly submits that just because the IT Dept got the information from investigation wing that Yamini Investments Company Limited is a penny stock, it doesn't mean that the assessee has indulged into misappropriation. The similar flow of transaction was pronounced, in the recent judgement of Vinay Kumar Dhingra HUF v/s ITO in Delhi bench of ITAT on 28 June 2021 where all the facts of transaction are similar to above case. The other facts to genuineness of transactions is as below: - i. The shares of Anax Com Trade Limited were purchased and were received in the Demat account and payment is made through banking channel vide account payee cheque, thus no question of raising doubt about the purchase of shares by the assessee is sustainable. ii. After the merger of Anax Com Trade Limited and Yamini Investments Company Limited, shares of Anax Com Trade Limited converted into shares of Yamini Investments Company Limited in Demat account as per the scheme of merger. iii. Transactions are being carried out through SEBI registered stockbrokers and Members of BSE, a recognized stock exchange of India and through Scheduled Commercial Banks. iv. Payment is received through banking channels from registered broker. v. Complied all the terms and conditions of section 10(38) i.e. shares are held by the assessee for more than 12 months (approx. 28 Months), paid STT of Rs. 9,191/- at the time of sale, transaction is being carried out through recognized stock exchange in India. vi. Where transactions are carried out at the floor of stock exchange where no one knows each other vis-a-vis purchaser, seller, company, broker and depository etc, and the transactions is being carried out as per laid down procedure by SEBI and rates are not decided by any of above party but by open market on demand and supply basis it cannot be said that the above transactions are a bogus transaction ignoring the facts and documentary evidences available. Printed from counselvise.com 8 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. vii. It is also hereby important to note that transactions are being carried out in an open market and in a recognized exchange hence prices of shares are not controlled /managed by the assessee. Similar view has found in the case of ITO-(24)(3)(1), Mumbai V/s M/s Indravardan Jain HUF, by hon'ble ITAT Mumbai I bench. It is also noted by the bench that investigation into penny stocks cannot necessarily mean that all transactions are bogus. The nature of the transaction does not change just because there is an investigation or because it is a penny stock. viii. Further, the Ld. Assessing Officer has not been able to provide any evidence about the mutual connivance of the assessee and the operators. There are no evidences that assessee given cash to any entry operators. The Ld. AO is silent on the Shares DEMAT Account and has not considered important evidences. ix. The shares were sold through recognised stock exchange on which the appellant has paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house and the seller only receives sales consideration from the stock exchange through the share broker. Therefore, neither the seller knew the purchasers, nor the purchasers knew the seller. In absence of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing. Therefore, the appellant cannot be said to be a part of the group indulging into rigging of share prices of the script as alleged by the Ld.AO and confirmed by the Ld. CIT(A). x. During the course of assessment proceedings the appellant submitted following documents to substantiate his claim of long term capital gain which is exempted under section 10(38) of the Act:- • Copy of share allotment • Copies of sale bills • Copy of bank statement • Copy of D-mat account • Copy of contract notes Printed from counselvise.com xi. However, one point to be noted that the finding of the Ld. AO is wrong and shows that the Ld. AO about the share transactions.The by Investigation Directorate wing. xii. It is pertinent to mention that the Appellant sold the shares during the months of June 2015andJuly 2015 in the FY. 2015 of Rs. 49.20/- to 58.90 fluctuating in the same ran shares were sold by the Appellant. xiii. The Appellant had purchased the shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers. The shares were received directly from the company and then dematerialized and on sale, the clearing corporation of BSE through its share broker. xiv. The Ld. AO denied the claim of long under section 10(38) and made addition of LTCG shares had been directly allotted by the been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. possession of the shar also reflected in D-mat account. xv. Not only that, the sale of shares was also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and after the sale of shares, the net rec assessee’s bank account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the 9 ITA No.1000/Mum/202 Rajendra Kumar Mundra (HUF)., Mumbai. However, one point to be noted that the finding of the Ld. AO is wrong and shows that the Ld. AO& the Ld. CIT(A) have no knowledge about the share transactions.They have relied on mere information Directorate wing. It is pertinent to mention that the Appellant sold the shares during the June 2015andJuly 2015 in the FY. 2015-16 from a price range 58.90/- per share and the price of the share was fluctuating in the same range for next 12-20 months even after the shares were sold by the Appellant. The Appellant had purchased the shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers. The shares were received directly from the company and then dematerialized and on sale, the D-mat shares were delivered to clearing corporation of BSE through its share broker. The Ld. AO denied the claim of long-term capital gain on sale of shares under section 10(38) and made addition of LTCG under section 68. The shares had been directly allotted by the company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. possession of the shares was not in doubt at all because same was mat account. Not only that, the sale of shares was also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and after the sale of shares, the net receipts had been credited to the assessee’s bank account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the 1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. However, one point to be noted that the finding of the Ld. AO is no knowledge relied on mere information It is pertinent to mention that the Appellant sold the shares during the 16 from a price range per share and the price of the share was 20 months even after the The Appellant had purchased the shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers. The shares were received directly from the company and ere delivered to the term capital gain on sale of shares under section 68. The company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. Thus, es was not in doubt at all because same was Not only that, the sale of shares was also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and eipts had been credited to the assessee’s bank account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the Printed from counselvise.com 10 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. material facts on record were quite evident that it was from the sale of shares. As there was no tangible material brought on record to convert these transactions then it is very difficult to treat the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. There was no evidence or any whisper that some unaccounted money had been routed and hence, sale proceeds should not be added. RELIANCE IS PLACED ON CASES INVOLVING YAMINI INVESTMENTS COMPANY LTD. SN CITATION OBSERVATION 1. IN THE INCOME- TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI ITA No. 3929/MUM/2024 Assessment Year :2016-17 ACIT, Circle, Mumbai Vs. Abhishek Rajendrakumar Mundra Date of pronouncement: 16/06/2025 9. After considering the entire facts and circumstances of the case, Ld. CIT(A) has rightly deleted the additions u/s 68/69C of the Act. No new facts or circumstances have been placed before us in order to controvert or rebut the findings so recorded by the Ld. CIT(A). Therefore, we find no reason to interfere with or deviate from such findings. Thus, we uphold the findings of the Ld. CIT(A) and dismiss the grounds of appeal raised by the revenue. 10. Since we have dismissed the appeal filed by the revenue and upheld the deletions, the CO filed by the assessee has become infructuous. 11. In the result, the appeal of the revenue is dismissed. 2. INCOME TAX APPELLATE TRIBUNAL DELHI BENCH \"G\": NEW DELHI ITA No. 13. We have already dealt extensively regarding the SEBI order as passed in respect of Yamini Investment Company Ltd shares by clearly bringing on record that the said order does not either directly or indirectly implicate the assessee in any manner whatsoever and all the allegations levelled in the said SEBI Printed from counselvise.com 11 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 3436/Del/2023 (Assessment Year: 2016-17) Sujit Madan Vs. DCIT Date of pronouncement: 20/01/2025 order does not apply factually to the assessee- be it with regard of stock split or the period of enquiry carried out by SEBI etc. The SEBI order is for the enquiry conducted from September 2013 to Jan 2014 with regard to behavior of the said scrip in the stock market whereas the assessee had sold the share in June 2015 and February 2016. Even if the scrip is to be construed as tainted scrip, the assessee cannot be implicated or linked with the alleged tainted persons merely because certain tainted persons were involved in the artificial rigging in the share price. Further, even in the Mumbai Tribunal relied upon by the ld DR vehemently, there is an observation that people who had approached the tainted parties in order to get accommodation entries in the form the exempt long-term capital gains. There is absolutely no evidence brought on record by the revenue in the instant case before us that assessee had either approached the alleged tainted parties/ entry operators who were involved in artificial rigging of share price of Yamini Investment Company ltd in order to receive accommodation entries in the form of exempt long-term capital gains. It is pertinent to note that assessee has been holding the share from September 2012 onwards and the price of the very same scrip in the open market in October 2014 was ranging from Rs. 452 to 496 per share. Considering the drastic fall in the said scrip, the assessee had chosen to sell it in three tranches at the price 61.70 per share; Rs 58.15 per share and Rs. 30.85 per share. This is classic case of assessee falling in the category of gullible investor who had been hit by the declining market prices due to alleged manipulationand artificial rigging of share prices carried out by some 3rd party who are totally unconnected with the assessee. Hence, in our considered opinion, reliance placed on the Printed from counselvise.com 12 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. decision of the Mumbai Tribunal would not come to the rescue of the revenue. Further, we find our view is further fortified by the decision of the Hon'ble Jurisdictional High Court in the case of PCIT Vs. Smt Krishna Devi reported in 431 ITR 361 (Del); decision of the Hon'ble Allahabad High Court in the case of PCIT Vs. Smt Renu Agarwal 153 taxmman.com 578 and decision of the Hon'ble Madhya Pradesh High Court in the case of CCIT (OSD) Vs. Nilesh Jain (HUF) 163 taxmann.com 229, among others. Now we are left with a situation wherein, the Hon'ble Jurisdictional High Court has decided in favour of the assessee and some non- Jurisdictional High Court had given divergent views. When there is a decision of Hon'ble Jurisdictional High Court, the same would prevail over other High Courts, Tribunal and this Tribunal need not take cognizance of the Hon'ble Non- Jurisdictional High Court or for that matter any other Tribunal decision. The law is very well settled by the decision of Hon'ble Supreme Court in the case of Union of India Vs. Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of the Hon'ble Jurisdictional High Court would have higher precedence value than the decision of the Hon'ble Non Jurisdictional High Court or the Tribunal. Hence, we deem it follow the decision of the Hon'ble Jurisdictional High Court in the instant case before us. 14. Further, we find that in assessee's brother's case, Shri Rajiv Madan, in respect of identical facts of sale of shares of Yamini Investment Company Limited, the income tax department had accepted the claim of short term capital gains disclosed by him to be genuine in the reopened assessment proceedings under section 143(3) read with section 147 of the Act dated 26-5-23. The learned AR placed on record the copy of the said Printed from counselvise.com 13 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. assessment order in pages 53-56 of the synopsis. This evidence also goes against the department wherein for the same set of shares, in case of assessee's brother, the entire transactions have been accepted as genuine by the department whereas, exactly contrary view has been taken in the case of the assessee herein. 15. In view of the aforesaid observations, we hold that there is absolutely no case made out by the revenue for justifying the denial of exemption under section 10(38) of the Act in the facts and circumstances of the instant case . Accordingly, the Ground Nos. 2, 3 and 5 raised by the assessee are hereby allowed. 16. The Ground No. 7 raised by the assessee is general in nature and does not require any specific adjudication. 17. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 20/01/2025. 3. INCOME TAX APPELLATE TRIBUNAL PUNE BENCH \"A\" ITA No.2016/PUN/2024 Assessment year: 2016-17 Jai bhagwan Banarasidas Jindal Vs. ITO, Ward-1, Jalna Date of pronouncement: 27-02-2025 41. The various decisions relied on by the Ld. Counsel for the assessee on the issue of reopening on the basis of report of the Investigation wing and non-application of independent mind by the Assessing Officer which amounts to borrowed satisfaction supports his case to the proposition that the reopening of the assessment merely on the basis of report of Investigation Wing and without independent application of mind by the Assessing Officer is void ab initio. Since admittedly in the instant case the assessment has been reopened on the basis of the information received through insight portal from DDIT (Inv), Delhi and without independent application of mind by the Assessing Officer, therefore, such re- assessment proceedings being not in accordance with law, have to be quashed. We, accordingly, quash the re-assessment Printed from counselvise.com 14 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. proceedings and the ground raised by the assessee on this issue is allowed. Since the assessee succeeds on this legal ground, the other grounds challenging the addition on merit are not being adjudicated being academic in nature. 42. In the result, the appeal filed by the assessee is allowed. 4. INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,\"A\" JAIPUR ITA No. 1253/JPR/2024 Assessment Year: 2016-17 The ACIT Vs. Hans Raj Agarwal Date of Pronouncement: 12/03/2025 36. As noticed above, such a survey operation was conducted in the case of Dutta and Tyagi Groupon 16-05-2018 which revealed that the assessee was one of the beneficiaries of the scrip of YICL listed in BSE having scrip code 511012. In other words, the AO had already called upon the assessee from time to time to furnish information, documents and details in respect of said transactions with YICL, before passing the previous assessment order dated 11-12-2018. It is well settled that where during assessment proceedings, the assessee company furnished entirematerial related to purchase and sale of shares and capital gains/ loss made therein and the AOhaving considered the details, took a conclusive view, reassessment proceedings which are initiatedu/s 147 by way of reconsideration of the material already available at the time of original assessment proceedings, would amount to change of opinion. In this regard, while passing the impugned order, Learned CIT(A) relied on decisions in ACIT vs Infinity.com Financial Securities Ltd. [2022] 145taxmann.com 212(SC) decided on 17-10- 2022, Hans Raj Agarwal whereby SLP failed against decision by Hon'ble Bombay High Court in Writ Petition No. 3497 of 2019 was dismissed. Therein, reference was also made to the decision in the case of Calcutta Discount Co. Ltd, 41 ITR 191and Gemini Leather Stores vs ITO, [1975] 100 ITR, and CIT vs Kelvinator of Printed from counselvise.com 15 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. India Ltd. 320 ITR 561(SC). 37. In view of the above discussion, we find that NFAC vide impugned order dated 14- 08-2024 was fully justified in allowing Ground No.7 raised by the assessee in the appeal challenging assessment order dated 17-05- 2023 while concluding that reopening in subsequent reassessment u/s 147 read with Section 144B of the Act was not valid. Conclusion 38. In view of the above findings and discussion, the appeal filed by the department deserves to bed is missed. Result 39. In view of the above discussion and findings, memorandum of cross objections No 1/JP/2025filed by the assessee is allowed. Hans Raj Agarwal the appeal-ITA No.1253/JPR/2024filed by department is hereby dismissed. 5. Appellant Order passed u/s 250 on 18.09.2023 by Hon’ble CIT (Appeal) – 27, Delhi in the matter of Dalip Nagar (Refer Legal Volume – page no. 205-239) 5.1.9 It is important to understand that the fluctuation in price of the shares is the normal phenomenon of the share market. There are instances when share price is manipulated by the certain group of persons commonly known as operators. These operators have different modus operandi. One such modus operandi is to jack up the price of a share to a very high level and then sell them off to common persons and come out from this equity share. Once they stop jacking up, prices of share start falling and many innocent investors get trapped. However, there are some persons who sale off their shares when prices are moving up and make good profit without being part of the operator group or even knowing them. Other such modus operandi is to manipulate the share prices to provide definite long/short term gain/loss to targeted persons in doing so. Generally, the operator has total control over Printed from counselvise.com 16 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. the purchases and sales of these shares. Investor is not allowed to independently purchase/sale the shares. Transactions are male through the designated share brokers as identified by the operators Once sale of Shares take place, the cash is transferred against this gain/loss. However, in the present purchase of shares took place through direct allotment of shares by the company that to years before the amalgamation of M/s Fidele Power and Infrastructure Ltd. with M/s Yamini Investments Company Ltd. (listed company) and therefore purchases were totally out of control of the operators. At the best it can be concluded that the assessee is the beneficiary of the operator's manipulation because when they were jacking up the share price, he had sold his shares and made some good profit. 5.1.10 In view of the above discussion and further observing that the Id. AO could not bring forward any evidence which can establish the cash trail between the assessee and the broker towards obtaining the long-term capital gain, the addition of Rs.87,21,207/- for AY 2017-18 and Rs.22,94,000/- for AY 2016-17 on account of unexplained cash credit u/s 68 of the IT Act are deleted. Further, once the capital gain of Rs.87,21,207/- for AY 2017-18 and Rs. 22,94,000/- for AY 2016-17 have been held as genuine, the addition of Rs.1,74,124/-for AY 2017-18 and Rs 45,000/- for AY 2016-17 on account of corresponding commission are also deleted In the result, the appeal is \"Allowed\" for AYs. 2016-17 & 2017-18 From the above Case Laws involving Yamini Investments Company Ltd. let us analyze the assesses case and compare the same with each case law: 1.The appellant has relied upon the fact that order was recently passed by the Hon’ble ITAT Mumbai in the case of the Abhishek Rajendra Kumar Printed from counselvise.com 17 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. Mundra, relative of the assessee, wherein no addition on the same issue of LTCG on the script of M/s Yamini Investment Company Ltd. 2.There is absolutely no evidence brought on record by the revenue in the instant case that assessee had either approached the alleged tainted parties/ entry operators who were involved in artificial rigging of share price of Yamini Investment Company ltd in order to receive accommodation entries in the form of exempt long-term capital gains. 3.In the instant case the assessment has been reopened on the basis of the information received through insight portal from DDIT (Inv) and without independent application of mind by the Assessing Officer, therefore, such re- assessment proceedings being not in accordance with law, have to be quashed. 4.It is well settled that where during assessment proceedings, the assessee has furnished entire material related to purchase and sale of shares and capital gains/ loss made therein and the Ld. AO having considered the details, took a conclusive view, reassessment proceedings which are initiated u/s 147 by way of reconsideration of the material already available at the time of original assessment proceedings, would amount to change of opinion. Thus, it is humbly submitted that it is said in the stock market, that 'PRICE IS GOD'. There is no reasonable justification for the price of any scrip at any point of time and for it to run up in a short span of time. Share prices can shoot up on mere news, e.g. when the government announces reduction in tax rates the Sensex rises by almost 1500-2000 points in a matter of minutes, taking the price of all and any scrip up and certain shares prices made a lifetime high. There are good companies whose share prices do not fetch a good price it deserves and there are certain shares whose prices do not justify the profitability of the company. It is not just only the fundamentals or financials results of the company that determine the price for which its shares are quoted on the stock exchange. It is the perception of buyers and sellers that determines the price of any share. It is also submitted that the assessee has made investments in the share of company as common and regular investor, sold the shares in the market, paid Securities Transaction Tax and have disclosed the capital gains on share transactions for taxation purpose in the tax returns of relevant assessment year. The assessee has held shares for a reasonable period of time & with prudent investments some of which have borne fruits. The assessee has also made several bad investments in various companies in which there has made substantial losses. FURTHER RELIANCE IS ALSO PLACED ONFOLLOWINGRECENTPENNY STOCK CASE LAWS: - Printed from counselvise.com 18 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. Hon’ble Supreme Court in the case of PCIT vs. Kuntala Mahapatra (Judgement dated 07.03.2024) Hon’ble High Court of Bombay in the case ofPrincipal Commissioner of Income-Tax-3 Mumbai Vs. Ziauddin A Siddique. (Judgement dated 04.03.2022) Hon’ble High Court of Bombay in the case ofCommissioner of Income-Tax-13 Vs. Shyam R. Pawar. (Judgement dated 10.12.2014) Hon’ble High Court of Bombay in the case ofCommissioner of Income-Tax Vs. Shri Mukesh RatilalMarolia (Judgement dated 07.09.2011) Hon’ble High Court of Bombay in the case Reynold Shirtings Vs. ACIT, CC 6 (3) Mumbai. (Judgement dated 14.12.2021) Hon’ble ITAT, ‘E’ Bench Mumbai in the matter of Manish Mahipatrai Shah Vs. CIT(A)/NFAC, Mumbai (Order dated 08.02.2024) Hon’ble ITAT, ‘F’ Bench Mumbai in the matter of Udayan Grover Vs. National Faceless Appeal Centre Delhi (Order dated 07.02.2024) Hon’ble ITAT, ‘F’ Bench Mumbai in the matter of Jitendra Udayal Jain Vs. National Faceless Appeal Centre Delhi. (Order dated 24.11.2023) Hon’ble ITAT, ‘A’ Bench Mumbai in the matter of Shri Abhishek Doshi Vs. Asstt. Commissioner of Income Tax, Mumbai. (Order dated 31.05.2023) Appellate Order passed u/s. 250 on 30.03.2023 By Hon’ble Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in the matter of Yogesh Harish Bulchandani. (Order dated 30.03.2023) FURTHER MORE RELIANCE IS ALSO PLACED ON FOLLOWING CASE LAWS: - SN CITATION OBSERVATION 1. [2015] 54 taxmann.com 108 (Bombay) HIGH COURT OF BOMBAY Commissioner of Income- tax-13 v. Shyam R. Pawar* DECEMBER 10, 2014 Section 68 of the Income-tax Act, 1961 - Cash credit (Share dealings) - Assessment years 2003-04 to 2006- 07 - Assesse declared capital gain on sale of shares of two companies - Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies Printed from counselvise.com 19 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assesse to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes [Para 7] [In favor of assesse] 2. [2014] 41 taxmann.com 118 (Hyderabad - Trib.) IN THE ITAT HYDERABAD BENCH 'A' Income-tax Officer, Ward 2, Nizamabad v. Smt. Aarti Mittal* NOVEMBER 6, 2013 Section 10(38) of the Income-tax Act, 1961 - Capital gains - Exemption of, on transfer of securities [Genuineness of transactions] - Assessment year 2006- 07 - Assesse filed its return declaring long term capital gains on shares traded in Calcutta Stock Exchange - Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assesse claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions Printed from counselvise.com 20 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assesse having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax - Whether on facts, transactions of purchase and sale of shares were to be regardedasgenuine in nature and, therefore, assesses claim was rightly allowed - Held, yes [Para 23] [In favor of assesse] 3. [2017] 77 taxmann.com 260 (Ahmedabad - Trib.) IN THE ITAT AHMEDABAD BENCH 'B' Pratik Suryakant Shah v. Income-tax Officer, Ward- 10 (3), Ahmedabad* OCTOBER 21, 2016 Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long- term securities (Bogus transactions) - AY 2006-07 - Assesse purchased 3000 shares of company 'T' through a stock broker - These shares were transferred to assesses demat account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assesse was one of beneficiary of such accommodation entries - Assessing authorities reopened assessment of assesse - Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assesse, assesses claim of exemptions of long-term capital gain on sale of shares could not be denied on basis of submission of said broker - Held, yes [Paras 17 and 18] [In favor of assesse] 4. ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad) ITA No. 1442/Ahd/2013 & CO No. Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares Printed from counselvise.com 21 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 209/Ahd/2013 Assessment Year: 2005-06 outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus 5. Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata) ITA No.1213/Kol/2016 Assessment Year :2005-06 Bogus capital gains from penny stocks: Long-term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assesse is at fault 6. CIT vs. Mukesh RatilalMarolia (Bombay High Court) INCOME TAX APPEAL NO. 456 OF 200 7 7th September 2011 S. 10(38)/ 68: Long-term capital gains on sale of \"penny\" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity 7. Smt. Sunita Jain, V/s. Income Tax Officer, Ward10 (3), Ahmedabad ITA. Nos: 501 & 502/AHD/2016 Assessment Year: 2008-09 The claim of the assesse cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account 8. ITO-24(3)(1) V/s M/s Arvind Kumar Jain HUF ITA No. 4862/MUM/2014 Assessment Year: 2005-06 Where assesses broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assesses share transactions bogus. 9. Kamla Devi S. Doshi V/s. The Income Tax Officer Ward 16(3)(1), I.T.A. No.1957/Mum/2015 Assessment Year: 2006-07 Bogus penny stocks capital gain: The s. 131 statement implicating the assesse is not sufficient to draw an adverse inference against the assesse when the documentary evidence in the form of contract notes, bank statements, STT Printed from counselvise.com 22 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error 10. Shri Sunil Prakash V/s. ACIT -15(2) I.T.A./6494/Mum/2014, Assessment Year: 2005-06 S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assesse and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68 11. Pramod Kumar Lodha vs. ITO (ITAT Jaipur) S. 10(38) Bogus long-term gains from penny stocks: The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assesse from the person other than the broker claimed by the assesse. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assesse at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assesse 12. Navneet Agarwal vs. ITO (ITAT Kolkata) Bogus Capital Gains From Penny Stocks: In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assesse is part of the scam. The chain of events and the live link of assesses action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus Printed from counselvise.com 23 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. operandi & human behavior and disregard the evidence produced by the assesse. All imp judgements referred 13. ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad) Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus 14. Meenu Goel vs. ITO (ITAT Delhi) Bogus Capital gains from penny stocks: Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assesse has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated Reliance is also placed on following case laws where such purchase and sale were allowed. 1. C.I.T Vs. Mukesh Marolia ITA 456 of 2007-Bombay HC 2. Muksh R Morolia V/s Add CIT(2006)6 SOT 247 3. ITO V/s. Mrs. Rasila N Gala ITA No.1773/Mum/2010 4. CIT V/s Kan Singh Rathore ITA 192of 2014 (Rajasthan HC) 5. M/s SBD Estate Private Limited V/s. ITO 584/Mum/2015 6. Ms Farrah Marker V/s ITO ITA No.3801/Mum/2015 order dated 27/04/2016 Printed from counselvise.com 24 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 7. Mr.ArvindAsmal Mehta V/s ITO ITA No.2799/Mum/2015 order dated 29/02/2016 8. Smt Jyoti D Shah V/s ITO ITA No.1843/Mum/2012 9. ITO V/s Deep Darshan Properties Pvt Ltd.2117 & 2118/Mum/2014 10. CIT-13 V/s ShyamR.Pawar (2015) -54 Taxmaan.com108- Bombay High Court 11. JafferaliK.Rattonsey vs DCIT ITA No.5068 Mum 2009 12. Kamla Devi S. Doshi ITA No. 1957/Mum/2015 13. Pratik Suryakant Shah (2017)-77 Taxmann.com 260 Ahemdabad Tribunal 14. Aarti Mittal (2014) 41 Taxmann.com 118(Hyderabad Tribunal) 15. CIT Appeal order in case of Umang D Soni 16. C.I.T Mumbai Vs. Mukesh RatilalMarolia Supreme Court - 2015 (9) TMI 854 - SUPREME COURT 17. The Commissioner of Income Tax-16. Vs. Mrs. Kesar A. Gada 2015 (1) TMI 1220 - BOMBAY HIGH COURT 18. Ramprasad Agarwal vs ITO2(3)(2), Mumbai[2018] 100 taxmann.com 172 (Mumbai - Trib.) 19. Shri Amar Nath Goenka Vs. The ACIT, Circle-20(1), New Delhi. ITA.No.5882/Del./2018 20. Mukta Gupta vs. ITO, Ward-1(4), Ghaziabad .I.T.A. No.2766/DEL/2018 21. AJAY GOEL vs .I.T.O, WARD 39(5)ITA No. 4481/DEL/2018 22. Principal Commissioner of Income-tax,(Central), Ludhiana v. Prem Pal Gandhi (P&H HC) 23. CIT VS Bhagwati Prasad Agarwal ITA No.22/Kol/2009 Calcutta High Court 24. Mr. Shyam R Pawar vs DCIT Central Circle 24 & 26 ITAT Mumbai (ITA No.5585/M/11 , 5620,5621 & 5622/M/11) 25. CIT (Jamshedpur) vs Arun Kumar Agarwal (HUF) Jharkhand HC 26. PCIT (Ludhiana) vs Sh. Hitesh Gandhi P &H HC Printed from counselvise.com 25 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 27. ACIT Central Circle-II, Jalandhar vs Hitesh Gandhi ITAT Amritsar [I.T.A. No.129(Asr)/2014] 28. Manish Kumar Baid and Mahendra Kumar Baid vs ACIT,Cir-35, ITA No.1236,1237/Kol/2017[ Kolkata-Tribunal] 29. Shri Jignesh Desai vs Income Tax Officer 35(2),ITA No.1263/Kol/2017) [Kolkata-Tribunal] 30. Navneet Agarwal, Legal Heir of Late Kiran Agarwal vs ITO, Ward-35(3) ITA No.2281/Kol/2017 [Kolkata-Tribunal] 31. Kiran Kothari HUF vs ITO Ward 35(3), Kolkata ITA No.443/Kol/2017 32. Shri Gautam Kumar Pincha vs ITO 34(4), Kolkata (ITA No.569/Kol/2017) 33. Ketulkumar D Jaiswal vs ITO S.K. ward-4 Modasa (ITA No. 546/Ahd/2015 ) [Ahemdabad-Tribunal] 34. CIT-I Jaipur vs Smt Pooja Agarwal , Shri Jitendra 2017 Rajasthan High Court 35. Shri Pramod Jain, Shri Ankit Jain, Shri Sunil Jian, Naina Jain and Smt .Nisha Jain vs DCIT & ITO Wd 3(2) Jaipur [Jaipur –Tribunal] 36. Shri Vivek Agarwal vs ITO Wd 1(2), Jaipur [Jaipur –Tribunal] 37. MrVimalchandGulabchand ,Mr Praveen Chand , Mr.Gatraj Jain & Sons (HUF), MrMahendra Kumar Bhandari vs ITO Chennai , ITA No. 2003,1721,2293,2748/CHNY/2017 [Chennai –Tribunal] 38. Anand Paul vs ACIT Circle-50 ITA No.165/Kol/2015 [Kolkata – tribunal] 39. M/s Bhoruka Engineering Industries Ltd vs DCIT Bangalore, KARNATAKA HIGH COURT 40. CIT vs Pushpa Malpani ITA No.50 of 2010 Rajasthan HC 41. M/s Amit Rastogi HUF , Shilpa Rstogi, Sadhana Rastogi, Ajay Kumar Rastogi vs ITO wd1(1) wd-2(3), Meerut ITA No.2128/2129/2131/2132/Del/2018 [Delhi-Tribunal] 42. Smt Shikha Dhawan vs ITO, Wd-4(2) ITA No.3035/Del/2018 [Delhi- Tribunal] 43. Shamim Imtiaz Hingora, Parvez Hingora, Shabeena Irfan Hingora, Arif Abdul RazakHingora vs ITO Wd-I Jalna, ITA No.1875,1876,1877,1878/Pun/2018 [Pune-Tribunal] Printed from counselvise.com 26 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 44. CIT (A)-45, MUMBAI order in case of Parul Hemant Patel 45. Mukesh B Sharma Vs ITO 11(3)(2) ITA No.6249/Mum/2018 46. Deepak Nagar Vs The ACIT-17 ITA No. 3212/Del/2019 47. Kaushalya Agarwal Vs ITO 35(3) ITA No.194/Kol/2018 48. VijayrattanBalkrrishan Mittal Vs DCIT ITA No. 3427, 3428, 3429/Mum/2019 49. Amit Mafatlal Shah vs ACIT ITA No. 5793/MUM/2019 50. Dipesh Ramesh Vardhan and others vs DCIT CC 2(2) ITA No.7648, 7662, 7651, 7650 and 7649/MUM/2019 51. Nishant Kantilal Patel and Others vs. ITO ITA No 05,06,07 and 10/SRT/2019 WITHOUT PREJUDICE TO ABOVE RELIANCE IS PLACED ON VARIOUS JUDGMENT WHERE ADDITION MADE ON THE BASIS OF THIRD PARTY STATEMENTS HAVE BEEN DELETED:- A. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C) had held that no addition can be made on the basis of surmises, suspicion and conjectures. B. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence. C. Hon’ble Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in I.T.A. No. 22/Kol/2009 dated 29.04.2009 at para 2 held as follows: a. “The tribunal found that the chain of transaction entered into by the assesse have been proved, accounted for, documented and supported by evidence. The assesse produced before the Commissioner of Income Tax(Appeal) the contract notes, details of his Demat account and, also, produced documents showing that all payments were received by the assesse through bank.” FURTHER RELIANCE IS ALSO PLACED ON FOLLOWING JUDICIAL PRECEDENTS:- (a) ITO 31(2)(2) vs.Kalpana M Ruia ITA 4130 and 4131/M/2015(Mum- Trib) Printed from counselvise.com 27 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. (b) CIT vs. Pinakin L Shah (ITA 3380 of 2010 dated 18-01-2012)(Bom) (c) Smita P Patil Vs. ACIT-CC-1 (ITA Nos. 1407, 1408 & 1409/PN/2012) (d) Arvind Asmal Mehta vs. ITO (ITA No.2799/Mum/2015)(Mum-Trib) (e) Smt. Sarita Devi vs. ITO (ITA No.1228/Hyd/2016)(Hyd-Trib) THE LD. AO HAS NOTHING ON RECORD TO SUGGEST THAT:- (a) Traded Shares (Scrips) were not listed on stock exchange. (b) Traded Shares (Scrips) are of bogus companies. (c) Demat /Bank account not in the name of assesse or do not exist. (d) Enquiry with Depository Participant ie NSDL/CDSL. As share is purchased and sold through Stock Exchange. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS / JUDICIAL PRONOUNCEMENTS FOR ADDITIONS DELETED WHICH WERE MERELY BASED ON INFORMATION NOT DISCLOSED TO THE ASSESSE IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE The Ld. AO have relied on statement made by operators. However, this statement has not been supplied to the appellant and hence this is in violation of fundamental rules of justice. This has also been upheld by various judicial pronouncements. Reliance is placed on following: SN Case Citation Observation/ Held 1. M/S ANDAMAN TIMBER INDUSTRIES V/s CCE CIVIL APPEAL NO. 4228 OF 2006 Not allowing the assesse to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assesse was adversely affected 2. Lalchand Bhagat AmbicaDav V/s CIT (37 ITR 28)(SC) Assessment made without disclosing to the assesse the information supplied by the department and without giving any opportunity to the assesse to rebate the information is violation of fundamental rules of justice. 3. DHAKESWARI COTTON MILLS LTD. v. CIT [1954] 26 ITR 777 An assessment so made without disclosing to the assesse the information supplied by the departmental representative and without giving any opportunity to the assesse to rebut the Printed from counselvise.com 28 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. information so supplied and declining to take into consideration all materials which the assesse wanted to produce in support of case constituted a violation of the fundamental rules of justice and called for interference on our part. 4. SETH GURUMUKH SINGH v. CIT [1944] 12 ITR 393 The Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assesse what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assesse to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assesse wanted to produce in support of its case. The result was that the assesse had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, was based on surmises, suspicions and conjectures. 5. Jai Karan Sharma v/s DCIT [2012] 23 taxmann.com 300 (Delhi) It is a fundamental principle of natural justice that no material should be relied upon against a party without giving him an opportunity of explaining the same 6. Hamish Engineering Industries (P.) Ltd. V/s DCIT [2009] 120 ITD 166 (MUM. Trib.) Whether since statements recorded from three parties on which Assessing Officer relied for purpose of assessment, had not been provided to assesse, order of Assessing Officer was bad in law to that extent - Held, yes 7. KishinchandChellaram v/s CIT [1980] 4 Taxman 29 (SC)- ITO, on the basis of letters from bank manager, not shown to assesse, treated amount so remitted as income from undisclosed sources—Tribunal, relying on letters of bank manager, upheld ITO's action— Whether tribunal justified—Held, on facts, no. 8. C Vasantlal& Co. vs. CIT [1962] 45 ITR 206 (SC) It was open to an income tax officer to collect materials to facilitate assessment even by private enquiry. But if he desires to use materials so collected, the assesse must be informed of the materials and must be given an adequate opportunity of explaining it. Suspicious cannot take place the evidence 1. DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No. 6727/M/2012 dt.20/8/2014 Printed from counselvise.com 29 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 2. K.P. Varghese v. ITO, (1981) 131 ITR 579 (SC); 3. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC); 4. CIT v. Calcutta Discount Co. Ltd.', (1973) 91 ITR 8 (SC); 5. Umacharan Shaw & Bros v. CIT', (1959) 37 ITR 271 (SC) Income assessed without evidence is bad-in-law. Income assessed by revenue without supporting material is not justified. 1. CIT V. BHUVANENDRA 303 ITR 235 (MAD.) 2. VINOD SOLANKI VS. UOI (233) ELT 157 (S.C.) 3. CIT V. KASHIRAM TEXTILE MILLS (P) LTD [2006]284 ITR 61 (GUJ)- 4. SARASWATHI OIL TRADERS V. CIT [2000] 254 ITR 259 (SC) Income cannot be assessed on mere statement basis. For assessment there has to be some evidence. Income cannot be assessed on mere retracted statement If not material to prove 1. Meghraj Jain V. UOI (Bombay High Court) 2. KailashbenManharlalChokshi v. CIT [2008] 174 Taxman 466 (Guj.) 3. M. Narayanan & Bros. v. Asstt. CIT [2011] 201 Taxman 207 (Mag.) 4. Bansal High Carbons (P)Ltd. 2009) 223 CTR 179 (Del). 5. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H) 6. CIT vs. K. Bhuvanendra and others (2008) 303 ITR 235 (Mad.) 7. Abid Malik Vs UOI, (2009TIOL272HC Del-FEMA) 8. CIT vs. Uttamchand Jain 320 ITR 554 (Bom), 9. Srinivas Naik (2009)117 ITD 201 (Bang) Addition cannot be made on assumption basis. There must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law. 1. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC) 2. CIT v. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC) 3. Omar Salay Mohamed Sait V/s CIT 1959 37 ITR 151 (SC) 4. DhirajlalGirdharilal V/s CIT (26 ITR 734) (SC) 5. Dr. Anita Sahai V/s DIT (266 ITR 597) (All) 6. MODI Creations Pvt. Ltd. V/s ITO [2011] 13 taxmann.com 114 (Delhi)-It will have to be kept in mind that section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is Printed from counselvise.com 30 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. rebuttable. In refuting the presumption raised, the initial burden is on the assesse. This burden, which is placed on the assesse, shifts as soon as the assesse establishes the authenticity of transactions as executed between the assesse and its creditors. 7. CIT- IV v. Shree Rama Multi Tech Ltd [2013] 34 taxmann.com 32 (Gujarat): Expenditure cannot be disallowed on account of 'bogus purchase' only on basis of assumption and presumption 8. View taken in Modi creation Pvt. Ltd. Is also taken in following decision. i. CIT v/s Divine Leasing & Finance Ltd. 158 Taxmann 440 (Delhi) (2007). ii. Nemichand Kothari V/s CIT (136 Taxman 216) (Gau.) (2004). iii. CIT V/s Value Capital Services (P) Ltd. 307 ITR 334 (Delhi)(2008). Thus, the addition made on the basis of bad-assessment order is also bad- in-law and should not be added. HUMBLE PRAYER In view of the aforesaid facts, evidences of the case, judicial proceedings and in the interest of justice the appellant humbly requests your good self to consider the above submission. 4. On the other hand Ld. DR relied upon the orders passed by the revenue authorities. 5. We have heard counsels for both the parties, perused the material placed on record, judgments cited before and also the orders passed by the revenue authorities. From the records, we noticed that assessee was allotted 20,000 equity shares of M/s Anax Com Trade Ltd., on 21.01.2013 for a value paid amounting to Rs. 2,00,000/- on the face value of Rs. 10/- per share. However the said company split the face value of shares from Rs. 10 to Rs. 1 and in Printed from counselvise.com 31 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. this way assessee got 2,00,000 shares and the same were also converted by merger / amalgamation following Bombay High Court order into 1,60,000 shares of Yamini Investments Company Ltd (Yamini). In this regard, assessee has placed on record ‘allotment letter, bank statement’ highlighting the payment made towards purchase of the said shares and also placed on record the order of Hon’ble High Court by which the company M/s Anax Com Trade Ltd was merged with Yamini Investments Company Ltd., which are at paper book page No. 51 to 95. 6. However looking at the market volatility and better returns, the assessee sold equity shares at recognized Bombay Stock Exchange (BSE) through broker IIFL securities Ltd and Arcadia Share & Stock Broker Pvt Ltd at various rates after paying STT, the details of which are contained herein below: SN Date of Sale Trade Rate Quantity Amount STT 1 24-07-15 50.75 10,000 5,06,993 508 2 14-06-15 56.25 20,000 11,23,875 1,125 3 25-06-15 58.60 10,000 5,85,414 586 4 26-06-15 58.75 20,000 11,73,824 1,173 5 29-06-15 58.90 15,000 8,82,616 884 6 30-06-15 49.20 25,000 14,71,027 1,473 7 01-07-15 58.90 20,000 11,76,822 1,178 8 13-07-15 57.60 10,000 5,75,424 576 9 16-07-15 56.20 30,000 16,84,314 1686 160,000 91,80,309 9,191 Printed from counselvise.com 32 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 7. In order to prove the said contention the assessee had already placed on record the copy of sale bills issued by the broker and copy of broker ledger through whom the shares were sold which are at paper book page No. 96 to 118. The assessee had also placed on record complete details pertaining to purchases, scheme of court of merger, D-MAT Accounts & sale notes (Broker's note) etc. All the payments have also been received through stockbroker of recognized stock exchange through banking channels, and in this regard copy of Bank Account Statements has been placed on record at Paper Book Page no. 42 to 50. 8. We noticed that even the Price of script Yamini Investments Company Limited was being determined, at recognized stock exchange, which is not in control of assessee. Even the number of shares held is determined and approved by Hon. Bombay High Court as per the scheme of merger. 9. As noticed above from the record, the assessee is not dealing only in one such scrip. However, the assessee has been a regular investor and earning gains/losses from investing in shares of many companies and no other gain (long term or short term) has been questioned by income tax department. 10. Thus only because of the fact that the income tax department got the information from investigation wing that Yamini Investments Company Limited is a penny stock, it doesn't Printed from counselvise.com 33 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. automatically means that the assessee has indulged into misappropriation. The similar flow of transaction was pronounced in the recent decision of the Coordinate Bench in the case of Vinay Kumar Dhingra HUF v/s ITO in Delhi bench of ITAT on 28 June 2021 where all the facts of transaction are similar to that of the above case. 11. The fact remains that the shares of Anax Com Trade Limited were purchased and were received in the Demat account and payment is made through banking channel vide account payee cheque, thus no question of raising doubt about the purchase of shares by the assessee is sustainable. After the merger of Anax Com Trade Limited and Yamini Investments Company Limited, the shares of Anax Com Trade Limited were converted into shares of Yamini Investments Company Limited in Demat account as per the scheme of merger. We also noticed that all the transactions were being carried out through SEBI registered stockbrokers and Members of BSE, a recognized stock exchange of India and through Scheduled Commercial Banks. Since the assessee had complied with all the terms and conditions of section 10(38) i.e. shares are held by the assessee for more than 12 months (approx. 28 Months), paid STT of Rs. 9,191/- at the time of sale, transaction is being carried out through recognized stock exchange in India as per procedure by SEBI and even the rates are not decided by any of the parties, but by open market on demand and supply basis. Thus it cannot be Printed from counselvise.com 34 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. said that the above transactions are a bogus transaction ignoring the facts and documentary evidences available on record. 12. It is also hereby important to note that the transactions were carried out in an open market and in a recognized stock exchange hence prices of shares are not controlled / managed by the assessee. Similar view has also been taken by the Coordinate Bench of ITAT in the case of ITO-(24)(3)(1), Mumbai V/s M/s Indravardan Jain HUF. It was noticed by the bench that the investigations into penny stocks cannot necessarily mean that all transactions are bogus. The nature of the transaction does not change just because there is an investigation or because it is a penny stock. 13. Further, the AO has not been able to place on record any evidence about the mutual connivance of the assessee and the operators. There is absolutely no evidences with regard to the fact that the assessee had given cash to any entry operators. Since the shares were sold through recognised stock exchange on which the assessee had paid Security Transaction Tax (STT) and other statutory taxes. The same were paid through proper banking channel. It is well known fact that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house and the seller only receives sales consideration Printed from counselvise.com 35 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. from the stock exchange through the share broker. Therefore, neither the seller knew the purchasers, nor the purchasers knew the seller. Thus in absence of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing. Therefore, In our view, in such circumstances the assessee cannot be said to be a part of the group indulging into rigging of share prices of the script as alleged by the AO and confirmed by the Ld. CIT(A). 14. We noticed that during the course of assessment proceedings, the assessee had submitted following documents to substantiate his claim of long term capital gain which is exempted under section 10(38) of the Act:- • Copy of share allotment • Copies of sale bills • Copy of bank statement • Copy of D-mat account • Copy of contract notes 15. It is pertinent to mention that the assessee had sold the shares during the months of June 2015 and July 2015 in the FY. 2015-16 from a price range of Rs. 49.20/- to 58.90/- per share and the price of the share was fluctuating in the same range for next 12-20 months even after the shares were sold by the assessee. And the factual position is contained in the below mentioned graph. Printed from counselvise.com 16. Since, the assessee from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers shares were received directly from the company and then dematerialized and on sale, the D delivered to the clearing corporation of BSE through its share broker. However, t term capital gain on sale of shares and made addition of LTCG the shares had been directly allotted by the company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. possession of the sha the same were also reflected in 36 ITA No.1000/Mum/202 Rajendra Kumar Mundra (HUF)., Mumbai. assessee had purchased the shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers shares were received directly from the company and then dematerialized and on sale, the D-mat shares were delivered to the clearing corporation of BSE through its However, the AO denied the claim of long term capital gain on sale of shares u/s 10(38) of the Act and made addition of LTCG u/s 68 of the Act. Whereas, been directly allotted by the company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. possession of the shares were not in doubt at all because also reflected in the D-mat account. 1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. had purchased the shares directly from the Company under Private Placement and sold at Bombay Stock Exchange through its share brokers and the shares were received directly from the company and then shares were delivered to the clearing corporation of BSE through its AO denied the claim of long- of the Act Whereas, been directly allotted by the company and the payment had been made through account payee cheques duly disclosed by assessee in the earlier year and said purchase of shares was evidenced not only from the bank statement but also by the allotment of shares. Thus, not in doubt at all because mat account. Printed from counselvise.com 37 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit. From the material facts on there was no evidence or any whisper on record that some unaccounted money had been routed. Thus, in our view there is absolutely no case made out by the revenue for justifying the denial of exemption u/s 10(38) of the Act in the case of the assessee. 17. The Coordinate Benches of the Tribunal in number of cases have already dealt with identical cases, where the same script i.e Yamini Investments company ltd is involved and after considering the totality of facts had deleted the additions in respect cases, the details of which are given herein below: SN CITATION OBSERVATION 1. IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI ITA No. 3929/MUM/2024 Assessment Year :2016- 17 ACIT, Circle, Mumbai Vs. Abhishek Rajendrakumar Mundra 9. After considering the entire facts and circumstances of the case, Ld. CIT(A) has rightly deleted the additions u/s 68/69C of the Act. No new facts or circumstances have been placed before us in order to controvert or rebut the findings so recorded by the Ld. CIT(A). Therefore, we find no reason to interfere with or deviate from such findings. Thus, we uphold the findings of the Ld. CIT(A) and dismiss the grounds of appeal raised by the revenue. 10. Since we have dismissed the appeal filed by the revenue and upheld the deletions, the CO filed by the assessee has become infructuous. Printed from counselvise.com 38 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. Date of pronouncement: 16/06/2025 11. In the result, the appeal of the revenue is dismissed. 2. INCOME TAX APPELLATE TRIBUNAL DELHI BENCH \"G\": NEW DELHI ITA No. 3436/Del/2023 (Assessment Year: 2016- 17) Sujit Madan Vs. DCIT Date of pronouncement: 20/01/2025 13. We have already dealt extensively regarding the SEBI order as passed in respect of Yamini Investment Company Ltd shares by clearly bringing on record that the said order does not either directly or indirectly implicate the assessee in any manner whatsoever and all the allegations levelled in the said SEBI order does not apply factually to the assessee- be it with regard of stock split or the period of enquiry carried out by SEBI etc. The SEBI order is for the enquiry conducted from September 2013 to Jan 2014 with regard to behavior of the said scrip in the stock market whereas the assessee had sold the share in June 2015 and February 2016. Even if the scrip is to be construed as tainted scrip, the assessee cannot be implicated or linked with the alleged tainted persons merely because certain tainted persons were involved in the artificial rigging in the share price. Further, even in the Mumbai Tribunal relied upon by the ld DR vehemently, there is an observation that people who had approached the tainted parties in order to get accommodation entries in the form the exempt long-term capital gains. There is absolutely no evidence brought on record by the revenue in the instant case before us that assessee had either approached the alleged tainted parties/ entry operators who were involved in artificial rigging of share price of Yamini Investment Company ltd in order to receive accommodation entries in the form of exempt long-term capital gains. It is pertinent to note that assessee has been holding the share from September 2012 onwards and the price of the very same scrip in the open market in Printed from counselvise.com 39 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. October 2014 was ranging from Rs. 452 to 496 per share. Considering the drastic fall in the said scrip, the assessee had chosen to sell it in three tranches at the price 61.70 per share; Rs 58.15 per share and Rs. 30.85 per share. This is classic case of assessee falling in the category of gullible investor who had been hit by the declining market prices due to alleged manipulationand artificial rigging of share prices carried out by some 3rd party who are totally unconnected with the assessee. Hence, in our considered opinion, reliance placed on the decision of the Mumbai Tribunal would not come to the rescue of the revenue. Further, we find our view is further fortified by the decision of the Hon'ble Jurisdictional High Court in the case of PCIT Vs. Smt Krishna Devi reported in 431 ITR 361 (Del); decision of the Hon'ble Allahabad High Court in the case of PCIT Vs. SmtRenu Agarwal 153 taxmman.com 578 and decision of the Hon'ble Madhya Pradesh High Court in the case of CCIT (OSD) Vs. Nilesh Jain (HUF) 163 taxmann.com 229, among others. Now we are left with a situation wherein, the Hon'ble Jurisdictional High Court has decided in favour of the assessee and some non- Jurisdictional High Court had given divergent views. When there is a decision of Hon'ble Jurisdictional High Court, the same would prevail over other High Courts, Tribunal and this Tribunal need not take cognizance of the Hon'ble Non- Jurisdictional High Court or for that matter any other Tribunal decision. The law is very well settled by the decision of Hon'ble Supreme Court in the case of Union of India Vs. Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of the Hon'ble Jurisdictional High Court would have higher precedence value than the decision Printed from counselvise.com 40 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. of the Hon'ble Non Jurisdictional High Court or the Tribunal. Hence, we deem it follow the decision of the Hon'ble Jurisdictional High Court in the instant case before us. 14. Further, we find that in assessee's brother's case, Shri Rajiv Madan, in respect of identical facts of sale of shares of Yamini Investment Company Limited, the income tax department had accepted the claim of short term capital gains disclosed by him to be genuine in the reopened assessment proceedings under section 143(3) read with section 147 of the Act dated 26-5- 23. The learned AR placed on record the copy of the said assessment order in pages 53-56 of the synopsis. This evidence also goes against the department wherein for the same set of shares, in case of assessee's brother, the entire transactions have been accepted as genuine by the department whereas, exactly contrary view has been taken in the case of the assessee herein. 15. In view of the aforesaid observations, we hold that there is absolutely no case made out by the revenue for justifying the denial of exemption under section 10(38) of the Act in the facts and circumstances of the instant case . Accordingly, the Ground Nos. 2, 3 and 5 raised by the assessee are hereby allowed. 16. The Ground No. 7 raised by the assessee is general in nature and does not require any specific adjudication. 17. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 20/01/2025. Printed from counselvise.com 41 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 3. INCOME TAX APPELLATE TRIBUNAL PUNE BENCH \"A\" ITA No.2016/PUN/2024 Assessment year: 2016- 17 JaibhagwanBanarasidas Jindal Vs. ITO, Ward-1, Jalna Date of pronouncement: 27-02- 2025 41. The various decisions relied on by the Ld. Counsel for the assessee on the issue of reopening on the basis of report of the Investigation wing and non-application of independent mind by the Assessing Officer which amounts to borrowed satisfaction supports his case to the proposition that the reopening of the assessment merely on the basis of report of Investigation Wing and without independent application of mind by the Assessing Officer is void ab initio. Since admittedly in the instant case the assessment has been reopened on the basis of the information received through insight portal from DDIT (Inv), Delhi and without independent application of mind by the Assessing Officer, therefore, such re- assessment proceedings being not in accordance with law, have to be quashed. We, accordingly, quash the re-assessment proceedings and the ground raised by the assessee on this issue is allowed. Since the assessee succeeds on this legal ground, the other grounds challenging the addition on merit are not being adjudicated being academic in nature. 42. In the result, the appeal filed by the assessee is allowed. 4. INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,\"A\" JAIPUR ITA No. 1253/JPR/2024 Assessment Year: 2016- 17 The ACIT Vs. Hans Raj Agarwal 36. As noticed above, such a survey operation was conducted in the case of Dutta and Tyagi Groupon 16-05-2018 which revealed that the assessee was one of the beneficiaries of the scrip of YICLlisted in BSE having scrip code 511012. In other words, the AO had already called upon the assessee from time to time to furnishinformation, documents and details in respect of said transactions with YICL, before passing theprevious assessment order dated 11-12-2018. Printed from counselvise.com 42 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. Date of Pronouncement: 12/03/2025 It is well settled that where during assessment proceedings, the assessee company furnished entire material related to purchase and sale of shares and capital gains/ loss made therein and the Ld.AO having considered the details, took a conclusive view, reassessment proceedings which are initiated u/s 147 by way of reconsideration of the material already available at the time of original assessment proceedings, would amount to change of opinion. In this regard, while passing the impugned order, Learned CIT(A) relied on decisions in ACIT vs Infinity.com Financial Securities Ltd. [2022] 145taxmann.com 212(SC) decided on 17-10-2022, Hans Raj Agarwal whereby SLP failed against decision by Hon'ble Bombay High Court in Writ Petition No. 3497 of 2019 was dismissed. Therein, reference was also made to the decision in the case of Calcutta Discount Co. Ltd, 41 ITR 191and Gemini Leather Stores vs ITO, [1975] 100 ITR, and CIT vs Kelvinator of India Ltd. 320 ITR 561(SC). 37. In view of the above discussion, we find that NFAC vide impugned order dated 14-08-2024 wasfully justified in allowing Ground No.7 raised by the assessee in the appeal challenging assessmentorder dated 17-05- 2023 while concluding that reopening in subsequent reassessment u/s 147 readwith Section 144B of the Act was not valid. Conclusion 38. In view of the above findings and discussion, the appeal filed by the department deserves to bed ismissed. Result 39. In view of the above discussion and Printed from counselvise.com 43 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. findings, memorandum of cross objections No 1/JP/2025filed by the assessee is allowed. Hans Raj Agarwal the appeal-ITA No.1253/JPR/2024filed by department is hereby dismissed. 5. Appellant Order passed u/s 250 on 18.09.2023 by Hon’ble CIT (Appeal) – 27, Delhi in the matter of Dalip Nagar (Refer Legal Volume – page no. 205-239) 5.1.9 It is important to understand that the fluctuation in price of the shares is the normal phenomenon of the share market. There are instances when share price is manipulated by the certain group of persons commonly known as operators. These operators have different modus operandi. One such modus operandi is to jack up the price of a share to a very high level and then sell them off to common persons and come out from this equity share. Once they stop jacking up, prices of share start falling and many innocent investors get trapped. However, there are some persons who sale off their shares when prices are moving up and make good profit without being part of the operator group or even knowing them. Other such modus operandi is to manipulate the share prices to provide definite long/short term gain/loss to targeted persons in doing so. Generally, the operator has total control over the purchases and sales of these shares. Investor is not allowed to independently purchase/sale the shares. Transactions are male through the designated share brokers as identified by the operators Once sale of Shares take place, the cash is transferred against this gain/loss. However, in the present purchase of shares took place through direct allotment of shares by the company that to years before the amalgamation of M/s Fidele Power and Intrastructure Ltd. with M/s Yamini Investments Company Ltd. (listed company) and therefore purchases were totally out of control of the operators. At the best it can be concluded that the assessee is the beneficiary of the operator's Printed from counselvise.com 44 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. manipulation because when they were jacking up the share price, he had sold his shares and made some good profit. 5.1.10 In view of the above discussion and further observing that the Id. AO could not bring forward any evidence which can establish the cash trail between the assessee and the broker towards obtaining the long-term capital gain, the addition of Rs.87,21,207/- for AY 2017-18 and Rs.22,94,000/- for AY 2016-17 on account of unexplained cash credit u/s 68 of the IT Act are deleted. Further, once the capital gain of Rs.87,21,207/- for AY 2017-18 and Rs. 22,94,000/- for AY 2016-17 have been held as genuine, the addition of Rs.1,74,124/-for AY 2017-18 and Rs 45,000/- for AY 2016-17 on account of corresponding commission are also deleted In the result, the appeal is \"Allowed\" for AYs. 2016-17 & 2017-18 18. Apart from the above the assessee has also relied upon the decision of Coordinate Bench of ITAT Mumbai, wherein the assessee’s relatives case i.e ACIT Vs. Abhishek Rajendrakumar Mundra, in ITA No. 3929/Mum/2024, had been decided and additions have been deleted with regard to the same script of M/s Yamini Investment Company Ltd, the relevant portion of the said decision is reproduced herein below: 6. From these facts, we notice that the assessee was allotted 12,500 equity shares of M/s Anax Com Trade Ltd. on 21.01.2013 for a value paid amounting to Rs. 1,25,000/- at Printed from counselvise.com 45 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. face value of Rs. 10. Thereafter, M/s. Anax Com Trade Ltd. split the face value of the shares from Rs. 10 to Rs. 1. However, on 09.05.2014, the said 1,25,000 shares of M/s Anax Com Trade Ltd. were converted, by merger/amalgamation, following the Hon'ble Bombay High Court order to 1,00,000 shares of Yamini Investments Company Ltd. (Yamini). Hence, the basic contention of the revenue was that the shares of Yamini Investments Company Ltd. were purchased, which is incorrect, as the assessee has come to hold shares of Yamini due to the said court order after many months of purchases of M/s. Anax Com Trade Ltd. equity shares. We also notice that the merger order of the Hon'ble Bombay High Court was followed by approval of the Securities and Exchange Board of India (SEBI) and government agencies for trading at the Bombay Stock Exchange (BSE). Later on, in response to the Hon'ble High Court order of merger, the assessee got entitled to 1,00,000 equity shares of Yamini Investments Company Ltd., which was lesser than the acquired 1,25,000 shares of M/s. Anax Com Trade Company Ltd. Later on, looking at market volatility and better returns, the assessee sold these equity shares at Recognized Bombay Stock Exchange through Brokers viz. Angel Broking Pvt. Ltd., IL & FS Securities Services Limited and Arcadia Share & Stock Brokers Pvt. Ltd from a price range of Rs. 49 to Rs. 62 per share. The shares of Anax Com Trade Limited were purchased and were received in the Demat account and payment is made through banking channel vide account payee cheque, thus no question of raising doubt about the purchase of shares by the assessee is sustainable. STT has also been paid on all the Sales Transactions. The sale of shares was also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and after the sale of shares, the net receipts had been credited to the assessee's bank account. And this hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the material facts on record were quite evident that it was from the sale of shares. As there was no tangible material brought on record to convert these transactions then it is very difficult to treat the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. We also found from the records that there was no evidence or any whisper that Printed from counselvise.com 46 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. some unaccounted money had been routed, and hence, in our view, the sale proceeds could not be added. 7. Reliance is being placed on the case involving the Yamini Investments Company Ltd., wherein the coordinate benches of ITAT have taken a consistent view in the case of Sujit Madan v/s DCIT in ITA No. 3436/Del/2023 dated 20.01.2025. The relevant findings of the coordinate bench are reproduced below: \"Further, even in the Mumbai Tribunal relied upon by the ld DR vehemently, there is an observation that people who had approached the tainted parties in order to get accommodation entries in the form the exempt long-term capital gains. There is absolutely no evidence brought on record by the revenue in the instant case before us that assessee had either approached the alleged tainted parties/entry operators who were involved in artificial rigging of share price of Yamini Investment Company ltd in order to receive accommodation entries in the form of exempt long-term capital gains. It is pertinent to note that assessee has been holding the share from September 2012 onwards and the price of the very same scrip in the open market in October 2014 was ranging from Rs. 452 to 496 per share. Considering the drastic fall in the said scrip, the assessee had chosen to sell it in three tranches at the price 61.70 per share; Rs 58.15 per share and Rs. 30.85 per share. This is classic case of assessee falling in the category of gullible investor who had been hit by the declining market prices due to alleged manipulation and artificial rigging of share prices carried out by some 3rd party who are totally unconnected with the assessee. Hence, in our considered opinion, reliance placed on the decision of the Mumbai Tribunal would not come to the rescue of the revenue. 14. Further, we find that in assessee's brother's case, Shri Rajiv Madan, in respect of identical facts of sale of shares of Yamini Investment Company Limited, the income tax department had accepted the claim of short term capital gains disclosed by him to be genuine in the reopened assessment proceedings under section 143(3) read with section 147 of the Act dated 26- 5-23. The learned AR placed on record the copy of the said Printed from counselvise.com 47 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. assessment order in pages 53-56 of the synopsis. This evidence also goes against the department wherein for the same set of shares, in case of assessee's brother, the entire transactions have been accepted as genuine by the department whereas, exactly contrary view has been taken in the case of the assessee herein. 15. In view of the aforesaid observations, we hold that there is absolutely no case made out by the revenue for justifying the denial of exemption under section 10(38) of the Act in the facts and circumstances of the instant case. Accordingly, the Ground Nos. 2, 3 and 5 raised by the assessee are hereby allowed.\" 8. Apart from the above coordinate Bench of the Tribunal, in a case involving the identical scrip, has also decided the issue in favour of the assessee and deleted the additions, the details of which are reproduced hereunder: 1. ITA No. 2016/Mum/2024 Jaibhagwan Banarasidas Jindal v/s ITO, Ward-1 Jalna. 2. ITA No. 1253/Jpr/2024 The ACIT v/s Hans Raj Agarwal 3. ITA No. 1191/JP/2024 ACIT/DCIT v/s Alok Kumar Jain 9. After considering the entire facts and circumstances of the case, Ld. CIT(A) has rightly deleted the additions u/s 68/69C of the Act. No new facts or circumstances have been placed before us in order to controvert or rebut the findings so recorded by the Ld. CIT(A). Therefore, we find no reason to interfere with or deviate from such findings. Thus, we uphold the findings of the Ld. CIT(A) and dismiss the grounds of appeal raised by the revenue. 10. Since we have dismissed the appeal filed by the revenue and upheld the deletions, the CO filed by the assessee has become infructuous. 10. In the result, the appeal of the revenue is dismissed. Printed from counselvise.com 48 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 19. Further reliance is also been placed on the decision in the following cases. SN CITATION OBSERVATION 1. [2015] 54 taxmann.com 108 (Bombay) HIGH COURT OF BOMBAY Commissioner of Income- tax-13 v. Shyam R. Pawar* DECEMBER 10, 2014 Section 68 of the Income-tax Act, 1961 - Cash credit (Share dealings) - Assessment years 2003-04 to 2006- 07 - Assesse declared capital gain on sale of shares of two companies - Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assesse to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes [Para 7] [In favor of assesse] 2. [2014] 41 taxmann.com 118 (Hyderabad - Trib.) IN THE ITAT HYDERABAD BENCH 'A' Income-tax Officer, Ward 2, Nizamabad v. Smt. Aarti Mittal* NOVEMBER 6, 2013 Section 10(38) of the Income-tax Act, 1961 - Capital gains - Exemption of, on transfer of securities [Genuineness of transactions] - Assessment year 2006- 07 - Assesse filed its return declaring long term capital gains on shares traded in Calcutta Stock Exchange - Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assesse claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did Printed from counselvise.com 49 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assesse having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through CSE after paying Securities Transaction Tax - Whether on facts, transactions of purchase and sale of shares were to be regardedasgenuine in nature and, therefore, assesses claim was rightly allowed - Held, yes [Para 23] [In favor of assesse] 3. [2017] 77 taxmann.com 260 (Ahmedabad - Trib.) IN THE ITAT AHMEDABAD BENCH 'B' Pratik Suryakant Shah v. Income-tax Officer, Ward- 10 (3), Ahmedabad* OCTOBER 21, 2016 Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long- term securities (Bogus transactions) - AY 2006-07 - Assesse purchased 3000 shares of company 'T' through a stock broker - These shares were transferred to assesses demat account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assesse was one of beneficiary of such accommodation entries - Assessing Printed from counselvise.com 50 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. authorities reopened assessment of assesse - Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assesse, assesses claim of exemptions of long-term capital gain on sale of shares could not be denied on basis of submission of said broker - Held, yes [Paras 17 and 18] [In favor of assesse] 4. ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad) ITA No. 1442/Ahd/2013 & CO No. 209/Ahd/2013 Assessment Year: 2005-06 Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus 5. Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata) ITA No.1213/Kol/2016 Assessment Year :2005-06 Bogus capital gains from penny stocks: Long-term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assesse is at fault 6. CIT vs. Mukesh RatilalMarolia (Bombay High Court) INCOME TAX APPEAL NO. 456 OF 200 7 7th September 2011 S. 10(38)/ 68: Long-term capital gains on sale of \"penny\" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity 7. Smt. Sunita Jain, V/s. Income Tax Officer, Ward10 (3), Ahmedabad ITA. Nos: 501 & 502/AHD/2016 Assessment Year: 2008-09 The claim of the assesse cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular Printed from counselvise.com 51 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. banking channels and the demat account 8. ITO-24(3)(1) V/s M/s Arvind Kumar Jain HUF ITA No. 4862/MUM/2014 Assessment Year: 2005-06 Where assesses broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assesses share transactions bogus. 9. Kamla Devi S. Doshi V/s. The Income Tax Officer Ward 16(3)(1), I.T.A. No.1957/Mum/2015 Assessment Year: 2006-07 Bogus penny stocks capital gain: The s. 131 statement implicating the assesse is not sufficient to draw an adverse inference against the assesse when the documentary evidence in the form of contract notes, bank statements, STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error 10. Shri Sunil Prakash V/s. ACIT -15(2) I.T.A./6494/Mum/2014, Assessment Year: 2005-06 S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assesse and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68 11. Pramod Kumar Lodha vs. ITO (ITAT Jaipur) S. 10(38) Bogus long-term gains from penny stocks: The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assesse from the person other than the broker claimed by the assesse. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assesse at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an Printed from counselvise.com 52 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assesse 12. Navneet Agarwal vs. ITO (ITAT Kolkata) Bogus Capital Gains From Penny Stocks: In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assesse is part of the scam. The chain of events and the live link of assesses action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assesse. All imp judgements referred 13. ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad) Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assesse were sham or bogus 14. Meenu Goel vs. ITO (ITAT Delhi) Bogus Capital gains from penny stocks: Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assesse has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated Printed from counselvise.com 53 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. 20. Considering the totality of the facts and circumstances as discussed by us above and also taking into consideration by the decisions of the Coordinate Benches of ITAT wherein the same scrip already been dealt with and also taking into consideration the assessee’s relatives case i.e ACIT Vs. Abhishek Rajendra Kumar (Supra) decided by the Coordinate Bench regarding the same scrip and while adhearing to the principles of judicial consistency and judicial discipline, we allow these grounds raised by the assessee and direct the AO to delete the addition. 21. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open court on 06.08.2025 Sd/- Sd/- (GIRISH AGRAWAL) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 06/08/2025 KRK, PS Printed from counselvise.com 54 ITA No.1000/Mum/2024 Rajendra Kumar Mundra (HUF)., Mumbai. आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u000eथ / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण,मु\u0003बई/ DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/BY ORDER, स\u000eािपत ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai Printed from counselvise.com "
Other Referred Cases
Vinay Kumar Dhingra HUF v/s ITO, Abhishek Rajendrakumar Mundra v/s ACIT, Sujit Madan v/s DCIT, Jaibhagwan Banarasidas Jindal v/s ITO, Hans Raj Agarwal v/s ACIT, Shyam R. Pawar v/s CIT, Mukesh Ratilal Marolia v/s CIT, Kamla Devi S. Doshi v/s ITO, Sunita Jain v/s ITO, Navneet Agarwal v/s ITO
Laws Referred To
Income Tax Act, 1961
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