REKHA RAJESH JOGANI,MUMBAI V. ITO 19(3)(1), MUMBAI

ITA 2916/MUM/2023

AI Insights

The case revolves around the appeal by Rekha Rajesh Jogani against the order of the CIT(A), National Faceless Appeal Centre, which upheld the additions made by the Income Tax Officer under sections 68 and 69C of the Income-tax Act for the Assessment Year 2014-15. The additions were related to the long-term capital gains claimed exempt under section 10(38) for the sale of shares of SRK Industries Ltd, alleged to be a penny stock, and unexplained expenditure towards commission on these sales. The Tribunal examined the documentary evidence provided by the assessee, including contract notes, bank statements, and demat account statements, and found them to be sufficient to prove the genuineness of the transactions. The Tribunal criticized the Assessing Officer for relying on general investigations and assumptions without specific evidence against the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470876 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del), Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022], PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom), CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom), Balkrisna Gajanan Thopte vs. DCIT, ITA No.3380/Mum/2019, dated 10.01.2024, Shri Rakesh Shantilal Shah vs. Ito [ITA 1775/Mum/2019], Smt. Geeta Khare vs. ACIT [ITA 4267/Mum/2018], Shri Narendra Kumar Saraogi vs. DCIT [ITA 46 & 47/ Kol/2018], Aditya Vikram Sureka HUF vs. L.T.O [ITA No. 1650/Kol/2018], Shree Shreyans Chopra vs. ACIT [ ITA 661/Kol/2018], Smt. Amrita Baid vs. I.T.O. [ITA No. 2477/Kol/2017], Smt. Snehlata Chopra vs. I.T.O. [ITA No.1386/Kol/2018], Smt. Pushpa Devi Chopra vs. I.T.O. [ITA No.1388/Kol/2018], Smt. Sampat Devi Chopra vs. I.T.O. [ITA No. 1387/Kol/2018]
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Onus to prove; Capital Gains; Accommodation entries; Scheme of amalgamation; Bogus
• Section: 143(3); 271(1)(c); 68; 133(6); 69C; 13; 274; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2916/MUM/2023 Assessment Year: 2014-15 Rekha Rajesh Jogani 259 Shanti Sadan, 3rd Floor Room No.23, Lamington Road, Grant Road Mumbai – 400 007 (PAN : ADHPJ9155H) Vs. Income Tax Officer Ward 19(3)(1), Mumbai (Appellant) (Respondent) Present for: Assessee : Shri. Sashank Mehta, CA Revenue : Mr. R. R. Makwana, Addl. CIT Date of Hearing : 07.01.2025 Date of Pronouncement : 28.03.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NCAC), Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1053990837(1), dated 27.06.2023 passed against the assessment order by Income Tax Officer-19(3)(1), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 30.12.2016 for Assessment Year 2014-15. 2. Grounds taken by the assessee are reproduced as under: “On the facts and in the circumstances of the case and in law, the Learned Assessing Officer has 2 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 Erred in computing the assessed income at Rs. 50,04,690/-, without verifying the actual facts, evidences and explanations of the appellant. The Learned Assessing Officer ought to have finalized the assessment on actual facts and merits. Erred in considering facts of the case, the appellant had purchased shares of Transcend Commerce Limited through private placement which was later on merged with SRK Industries Ltd Also, the sales of shares was through proper demat account and the assessee has produced all the documentary evidences such as contract notes, broker ledger, demat statement global report etc. and all payments and receipts for acquiring & selling the shares were made properly through the banking channel The Ld AO has erred in appreciating the facts that mere statements given and recorded by some persons claiming that the shares prices are rigged and that the said company is providing bogus entries for LTCG/STCL, etc. cannot be the basis to justify the bogusness of all the shareholders of the said company. The Ld AO failed to prove that the transaction carried out was a sham without bringing relevant corroborative and credible material, on record and making the impugned addition The Ld AO erred in finalizing the said assessment order by adding the income on mere statement of few people on record without appreciating the fact that no documentary evidence is available against the assessee. The Appellant prays that the addition made u/s 68 as declared by Assessing Officer in his order to be deleted and the penalty initiated u/s. 274 r.w.s. 271(1)(c) to be dropped 2.1. Grounds taken are in respect of addition made under section 68 by denying exemption claimed under section 10(38) of the Act for the sale proceeds of listed equity shares alleged as penny stock amounting to ₹ 45,21,595/- on the scrip SRK Industries Ltd. and for addition of ₹ 90,432/- under section 69C as unexplained expenditure towards commission estimated @ 2% on the sale proceeds of the said alleged scrip. 3. Brief facts of the case are that assessee filed her return of income on 27.07.2014 reporting total income at ₹ 3,9,2665/-. In this assessment, ld. Assessing Officer enquired about the capital gain on sale of shares of SRK Industries Ltd. claimed as exempt under section 10(38) of the Act. Assessee furnished necessary details in this respect. 3 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 3.1. In the course of assessment, Ld. Assessing Officer called for details and explanations in respect of the transaction of sale of shares on which exemption has been claimed under section 10(38) on account of long-term capital gain earned by the assessee. To corroborate the facts, assessee furnished the relevant documentary evidences which are placed on record in the paper book before us, containing 40 pages, which includes: a) Purchase invoice for shares acquired of SRK Industries b) Bank statement evidencing payment for above purchase c) Demat Account reflecting the credit of shares of Transcend Commerce Limited d) Holding Statement as on 30.09.2012 e) Letter of allotment of shares of SRK Industries Ltd pursuant to amalgamation 1) Demat Account statement for FY 2013-14 g) Brokers ledger h) Contract notes for sale i) Bank statement reflecting receipt on sale of shares 3.2. The chronology of events and transaction of purchase and sale as explained by the assessee is tabulated below: 24.05.2012 Cheque No. 436965 drawn in the favour of Island Media & Entertainment Pvt. Ltd from A/c. No.: 04231530001081 for purchase of 6,000 eq. shares of Transcend Commerce Limited @ Rs. 10/- per share Rs. 60,000/- [Pg.3 of paperbook) 24.05.2012 Sale bill issued by Island Media & Entertainment Pvt. Ltd in the name of the Appellant for the above purchase. [Pg. 1 of paperbook] 4 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 06.06.2012 6,000 eq. shares of Transcend Commerce Limited were credited to the DEMAT account [Pg. 9 of paperbook] 16.05.2013 Transcend Commerce Limited was amalgamated with SRK Industries Limited whereby the swap ration was 1:2.22 and allotment letter dated 20.05.2013 was issued [Pg. 6 of paperbook] 17.05.2013 Pursuant to the scheme of amalgamation, the Appellant received 13,320 eq. shares of SRK Industries Limited [Pg. 7 of paperbook] 14.08.2013 Appellant sold 1,000 eq, shares of SRK Industries Limited through recognized stock exchange. [Pg. 13 & 9 of paperbook] Rs. 3,44,913 16.08.2013 Appellant sold 1,500 eq. shares of SRK Industries Limited through recognized stock exchange. [Pg. 11 & 9 of paperbook] Rs. 5,14,915 26.08.2013 Appellant sold 6,000 eq. shares of SRK Industries Limited through recognized stock exchange. [Pg. 10 & 9 of paperbook] Rs. 20,06,020 01.10.2013 Appellant sold 4,820 eq. shares of SRK Industries Limited through recognized stock exchange. [Pg. 12 & 9 of paperbook) Rs. 16,46,050 Long Term Capital Gains Rs. 44,51,898 3.3. In the course of assessment, Ld. Assessing Officer also issued notices under section 133(6) to the purchaser of the shares sold by the assessing, referred to as “exit providers” which according to him remained un-complied. Ld. Assessing Officer also referred to statement of various persons who according to him were running the racket of providing accommodation entries by manipulating the share prices of alleged penny scrip of SRK Industries Ltd. Assessing Officer noted that statement of these various persons was recorded during the course of survey/search operations undertaken by Investigation Wing of the 5 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 Department to state that they had provided accommodation entries in the alleged penny scrip. 4. Ld. Assessing Officer, after considering the submissions made by the assessee, arrived at the adverse conclusion by observing that there is unusual rise in the price of the shares sold by the assessee which has been investigated by the Investigation Wing of the Department to establish that cash has been routed from various accounts to provide accommodation to the assessee and that assessee had failed to discharge her onus to prove the unusual rise and fall of share prices. Ld. Assessing Officer placed heavy reliance on the doctrine of preponderance of human probability to hold that the assessee is indulged in bogus and dubious share transactions since she had not been able to adduce cogent evidences in this regard. Ld. Assessing Officer also observed that assessee had mainly traded in one scrip of SRK Industries Ltd., while bringing adverse conclusion. In this respect, assessee evidently demonstrated that it had invested in various scrips. Details of holding of shares in various scrips as on 31.12.2014 duly reflected in her DEMAT account was furnished. The scrips so include the following: a) Bckons Industries Ltd b) California Software Ltd c) Encore Software Ltd d) Ganesh Benzoplast Ltd e) HBL Power Ltd f) Jindal Steel Ltd g) L&T ltd 6 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 h) NACL i) NHPC Ltd J)ONGC k) Reliance INdustries Ltd 1) Shree Ashtavinayak Cine Vision Ltd m) Swastik Vinayak Art and Heritage Ltd n) Tech Mahindra Ltd o) The Andhra Petrochemicals Ltd p) Wipro Ltd q) Satyam Computers 4.1. It is worth noting that before drawing adverse conclusion, ld. Assessing Officer deliberated on the general modus operandi of such transactions as well as background of the investigation carried out by the wing, without pinpointing anything specific towards assessee, in this regard. 4.2. Ld. Assessing Officer, thus completed the assessment by making an addition u/s 68 of the Act towards entire sale consideration of Rs. 45,21,595/- received by the assessee on the transaction of sale of shares in the aforesaid scrip. Ld. Assessing Officer also estimated unexplained expenditure towards commission @ 2% of the sale proceeds to make an addition of Rs.90,432/- u/s. 69C of the Act. Aggrieved, assessee went in appeal before the ld. CIT(A), who upheld the same. 7 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 5. Before us, ld. Counsel for the assessee has reiterated the submissions made before the authorities below. He has also placed on record all the relevant documents and evidences in the form of paper book, details of which are already noted above, backed by judicial precedents of the Hon’ble jurisdictional High Court of Bombay. The submissions so made are not reiterated to avoid duplicity. Ld. Counsel for the assessee has placed on record his rebuttal and clarifications on the orders of SEBI referred by ld. Assessing Officer. According to the ld. Counsel, SEBI had not issued any notice to the assessee and had not framed any charges against her. 5.1 In the course of hearing, ld. Sr.DR had placed reliance on the order of ld. Assessing Officer and referred to adjudication orders passed by SEBI and asserted that the share transactions undertaken by the assessee are of tainted scrips which were investigated and subjected to penalties. 6. We note that transactions for purchase were undertaken on BSE platform through the broker Monarch Research & Brokerage Pvt. Ltd. and so also the sale of the aforesaid shares were undertaken on the stock exchange platform through the SEBI registered broker on which STT was levied and the consideration was routed through normal banking channel. The entire flow of these transactions is corroborated by relevant documentary evidences placed on record. While making the addition, there are no discrepancies pointed out by the Assessing Officer in the documents and the details furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment 8 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 proceedings nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case. 7. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp movement in the share prices of the aforesaid scrip is not justified. He has relied upon the search and survey operations conducted by the investigation wing of the Department at various locations in respect of alleged penny stock which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assessee is un-supported by any cogent material on record. The finding arrived at by the ld. Assessing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged her burden by submitting the relevant documents, details of which are already extracted above, forming part of the paper book. 7.1. For our observations and findings, we place reliance on the decision in the case of CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of 9 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon’ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon’ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 7.2. Reliance placed by the ld. Assessing Officer on the report of investigation wing without further corroboration based on cogent material does not justify the conclusion that the impugned transaction is bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transaction cannot be sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging. 8. We note that ld. Assessing Officer has observed about the so- called purchasers of shares sold by the assessee who have not been identified even though notices were issued u/s.133(6) of the Act. In this context, it is worth noting that impugned share sale transactions undertaken by the assessee are on the online digital trading platform of stock exchange of BSE which is a regulated market under the aggies of a regulator viz. SEBI. There is nothing on record from the market 10 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 regulator SEBI for the relevant period which establishes the ‘tainted’ status of the scrip involved in the present case, so as to hold the share sale transactions as bogus/accommodation entry as alleged by the ld. AO. It is also important to note that the operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Further, sale proceeds are received through the stock market process into the pre-identified bank account of the seller i.e., the assessee which cannot be tainted as ‘unexplained or unaccounted or undisclosed’ money for the addition made u/s. 68 by the ld. Assessing Officer. 9. For our observations and to arrive at the findings, we find force of binding nature from the decisions of Hon'ble High Court of Bombay being a jurisdictional High Court: i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held as under:- \"1. The following question of law is proposed: \"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was DMATed and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?\" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (\"RFL\") is done through stock exchange and through the registered Stock Brokers. The payments have been 11 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 made through banking channels and even Security Transaction Tax (\"STT\") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal.” 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs.\" ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: “Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason to add capital gains as unexplained cash credit under section 68” iii) CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom) wherein it was held: “Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68” 9.1. We also take note of the decision of Coordinate Bench in the case of Balkrisna Gajanan Thopte vs. DCIT, in ITA No.3380/Mum/2019, dated 10.01.2024 for Assessment Year 2014-15 which also dealt with identical scrip of SRK Industries Ltd. deleting the addition made of 12 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 similar account both u/s.68 and 69C. There are several other decisions of Coordinate Benches which dealt with the same scrip of SRK Industries Ltd. holding in favour of the assessee on similar nature of transaction as undertaken by the assessee. The same are listed below: a. Shri Rakesh Shantilal Shah vs. Ito [ITA 1775/Mum/2019) b. Smt. Geeta Khare vs. ACIT [ITA 4267/Mum/2018] c. Shri Narendra Kumar Saraogi vs. DCIT [ITA 46 & 47/ Kol/2018) d. Aditya Vikram Sureka HUF vs. L.T.O [ITA No. 1650/Kol/2018) e. Shree Shreyans Chopra vs. ACIT [ ITA 661/Kol/2018) f. Smt. Amrita Baid vs. I.T.O. [ITA No. 2477/Kol/2017] g. Smt. Snehlata Chopra vs. I.T.O. [ITA No.1386/Kol/2018] h. Smt. Pushpa Devi Chopra vs. I.T.O. [ITA No.1388/Kol/2018] i. Smt. Sampat Devi Chopra vs. I.T.O. [ITA No. 1387/Kol/2018] 10. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as discussion and observations made herein above, we delete the addition made u/s 68 towards proceeds of sale of listed shares of SRK Industries Ltd. which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the assessee in this respect are allowed. 11. Addition made by the ld. Assessing Officer on estimate basis towards commission for arranging alleged artificial capital gains @ 2% amounting to Rs.90,432/- is consequential to the addition made 13 ITA No. 2916/Mum/2023 Rekha Rajesh Jogani, AY 2014-15 towards receipt of sale proceeds of alleged penny stock. Since we have deleted the said addition towards sale proceeds of alleged penny stock in terms of above stated observations and findings, this consequential addition of commission has no foundation to stand. Accordingly, the same is deleted. Grounds taken by the assessee in this respect are allowed. 12. In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 28 March, 2025 Sd/- Sd/- ( Saktijit Dey) (Girish Agrawal) Vice President Accountant Member Dated: 28 March, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "