VAIBHAV KISHORE BANSAL,CHANDIGARH V. PRINCIPAL COMMISSIONER OF INCOME TAX, PANCHKULA

ITA 495/CHANDI/2024

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The case revolves around an appeal by Vaibhav Kishore Bansal against a revision order by the Principal Commissioner of Income Tax, Panchkula, which was based on allegations of bogus long-term capital gains claimed through manipulated trading of penny stocks. The original assessment by the Assessing Officer at the National Faceless Assessment Centre, Delhi, had accepted the assessee's claims. However, the PCIT found discrepancies and issued a show-cause notice under Section 263 of the Income Tax Act, 1961, leading to the revision order. The Tribunal examined the evidence presented, including bank transactions and stock exchange records, and concluded that the assessee's transactions were genuine and properly documented.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 27099 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: PARIKSHIT AGGARWAL
• Keywords: Business income; Wrong claim; Earning of tax free income; Assessment record; Revision of order; Penny stocks; Bogus
• Section: 147; 263; 69A; 20

Judgement Text

" ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 1 IN THE INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH: ‘B’: CHANDIGARH) BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER ITA No:- 495/CHANDI/2024 (Assessment Year- 2016-17) Vaibhav Kishore Bansal, Chandigarh. Vs. Principal Commissioner of Income Tax, Panchkula. PAN No: BIYPB0784P APPELLANT RESPONDENT Assessee by : Sh. Parikshit Aggarwal, CA and Ms. Shruti Khandelwal, Adv Revenue by : Smt. Kusum Bansal, CIT(DR) . Date of Hearing : 02.01.2025 Date of Pronouncement : 20.01.2025 ORDER PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of revision order passed by Principle Commissioner of Income Tax, (PCIT), Panchkula, under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 27.03.2022 ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 2 for the Assessment Year 2016-17. Originally assessment was framed by Assessing Officer (AO), National Faceless Asssessment Centre, Delhi, under Section 147 r.w.s. 144B of the Act, vide his order dated 27.03.2022. 2. Briefly stated facts are that the original assessment was completed U/s147 r.w.s. 144B of the Act by the AO, NFAC, Delhi vide order dated 27.03.2022. Subsequently, PCIT, on perusal of assessment records noticed certain discrepancies in the assessment order and issued show-caused notice U/s 263 of the Act dated 06.03.2024. The PCIT noticed that as per information received from the Directorate of Income Tax (Investigation) New Delhi, that the assessee has claimed bogus long term capital gain / short term capital gain through the use of penny stocks being sold to facilitate these transactions by way of manipulated trading. The PCIT, noted as per information available that assessee have sold shares amounting to Rs. 43,30,183/- during the Financial Year 2015-16 relevant to this Assessment Year 2016-17. The PCIT, noted that the AO has examined the original purchase invoices of shares as well as sales contract note of shares, but did not verify whether the shares ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 3 were purchased on exchanged in assessee’s name or are entered in the de-mat account of share broker. Since, no verification was made from the broker and assessment was completed without verification, he proposed to hold the assessment order as erroneous in so far as it is prejudicial to the interests of revenue in view of the following: “The AO has completed the assessment by accepting the returned income without bringing on record any document from which it was verified that the shares had been genuinely purchased by you. Also, the AO accepted your claim without inquiring into and verifying if and how you had actually made any payment for purchase of these shares. In the absence of requisite inquiry as mentioned above, the AO erred in accepting exempt income of Rs 57,90,652/- u/s 10(38) of the Income Tax Act, 1961. The assessment order has been passed allowing relief without inquiring into the claim of exemption of LTCG which was called for in view of the report from O/o Directorate of Income Tax (Investigation) New Delhi.” 3. The assessee filed reply dated 19.02.2024 and stated that the assessee has disclosed the entire purchase of shares from Pears Mercantile Pvt. Ltd. and Quantum Suppliers Pvt. Ltd. for sum of Rs. 2.50 lakhs on 03.09.2012 and Rs. 1.70 lakhs on 26.07.2013 respectively. The assessee also sold these shares for a sum of Rs. 57,90,652/- and claimed the same as exempt U/s 10(38) of the Act, and paid STT, on the sales of these shares. It was claimed that ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 4 entire details of purchases and sales were enquired by the AO during the original assessment proceedings, and the assessee has provided proof of sales in the nature of invoices and contract notes duly issued by the recognised Bombay Stocks Exchange. Even the payments accrued were made through the settlement of the exchange. Even the contract note is issued by exchange, mentioning the date and time of the transaction. All these transactions are online and through Official platforms of BSE. The assessee also enclosed the financial ledger of the book of M/s Shares India Securities Limited, having complete details of the transaction executed. Further, the assessee was required to file the following: “Computation of LTCG claimed as exept. Details of share sold on which LTCG was claimed. Bank account statement. Demate account statement Confirmation whether shares were purchased through stock exchange or offline.” The assessee also filed complete details of purchases as under: Shares From whom purchased as per sale invoice Quantity Amount Date of purchase Ojas Asset Recon Pears Mercantile Pvt. Ltd. 14100 1,70,000 03.09.2012 Ojas Asset Quantam 8000 2,50,000 26.07.2013 ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 5 Recon Suppliers Pvt. Ltd. The PCIT was not convinced with the reply of assessee and noted that the assessee furnished copy of passbook of Canara Bank in support of payment of Rs. 2,50,000/- made to Pears Mercantile Pvt. Ltd. on 26.07.2013, which is in the name of Sanjay and sons HUF and not in the name of assessee. The PCIT noted that purchase itself in doubt as regards to another purchase made from Quantum Suppliers Pvt. Ltd. of Rs. 1.70 lakhs as no evidence was furnished. In the absence of any proof of purchase of shares in FYs 2012-13 and 2013-14, the PCIT noted that the claim of assessee i.e. sum of Rs. 58,08,772/- received by assessee through the account of sale of shares, is bogus. Hence, practically directed the AO to add the same U/s 68/ 69A of the Act, by observing as under: “The assessee furnished copy of bank passbook of Canara Bank in support of payment of Rs. 2,50,000/- made to Pears Mercantile Pvt. Ltd. on 26.07.2013. However, it is noticed that the said bank account withCanara Bank isnot in the name of the assesse. It is in the name of Sanjay and Sons HUF. Hence, the purchase of shares by the assessee Sh. Vaibhav Kishore Bansal is not proved. The assessee submitted that Rs. 2,50,000/- was paid to Pears Mercantile Pvt. Ltd. whereas as per the table above, Rs. 2,50,000/- was pertaining to purchase claimed to have been made from Quantam Suppliers Pvt. Ltd. No evidence has been filed of payment of Rs. 1,70,000/- for purchase of shares. Further, the assessee has not filed copy of his Demat account despite being asked specifically for the same. It is admitted by the assessee that the shares were purchased offline. Therefore, the purchase of shares has been pre-dated to FY 2012-13 and 2013-14 to claim exempt LTCG. ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 6 In the absence of any proof of purchase of shares in FYrs 2012-13 and 2013-14 produced by the assessee and further the positive facts found as a result of investigation as reported in the report of the Investigation Wing, the claim of the assessee that sum of Rs 58,08,772/- received by him during the year was on account of sale of shares was apparently a false claim. An addition of the same was required to be made u/s 68/69A of the Act. The claim made by him in the return of income of exempt LTCG of Rs. Rs 57,90,652/- was also a false claim and was required to be disallowed.” Aggrieved, the assessee came in appeal before Tribunal. 5. We have heard rival contentions and gone through the facts and circumstances of the case. First of all, it is to be noted that the AO has examined the claim of sales of shares and sales of shares are through recognised the Bombay Stocks Exchange, and this fact is noted by AO in his assessment order as under: “1. Copy of the original return filed on 20.02.2017 2. Copies of Purchase Invoices of shares. 3. Copies of Sales Contract Note of shares. The assessee stated that the original return of income for A.Y. 2016-17 was filed on 20.02.2017, showing business income of Rs.9,17,179/ and exempted income of Rs.57,90,652/ u/s 10(38) of the I. T. Act from sale of shares on which STT was paid. The assessee has provided copies of Contract Notes issued by Share India Securities Ltd., a member of the Bombay Stock Exchange. The shares were purchased on 03.09.2012 from Pears Mercantile (P) Ltd., Kolkata with PAN: AAFCP8292H and on 26.07.2013 from Quantum Suppliers (P) Ltd., Kolkata with PAN: AAACQ1621L. The documents furnished by the assessee are verified.” ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 7 We noted that this transaction is through banking channels and through stock exchange and there is no doubt about it. The only doubt left is as regards to claim that these purchases of shares in Years 2012-13 and 2013-14 are not substantiated. The assessee furnished copy of bank passbook of Canara Bank in the name of Sh. Sanjay & sons HUF and assessee is one of the beneficiaries of this transactions. The assessee before us, is able to prove that this consideration for purchase of shares of Rs. 2.50 lakhs is received from Sanjay and Sons HUF and this is correlated by assessee’s counsel, before us from the bank account of Sh. Sanjay and Sons HUF as well as copy of account produced before us in assessee’s paper book. The assessee has also filed affidavit of Sh. Sanjay Kumar Bansal, Karta of HUF and admitting the transfer of amount of Rs. 2.50 lakhs on 26.07.2013 on behalf of the assessee towards purchase of shares. We find that assessee is able to prove the transaction of shares. In regard to another transaction of Rs. 1.70 lakhs for purchase of shares, we noted that the assessee was able to file the details before us, being payment made from the copy of account of the assessee’s books, hence, we find that the purchase transaction are explained. ITA No.- 495/Del/2024 Vaibhav Kishore Bansal 8 6. In view of the above, we noted that the sale of shares of Rs. 57,90,652/- is properly explained by assessee, and the claim of exemption u/s 10(38) is within the provisions of the law. Even the AO has carried out proper enquiry and, after enquiry reach conclusion that the assessee’s claim is as per law i.e. both purchase and sales. Hence, we find no error in the assessment order, and this is no prejudice cause to the revenue. Hence, we quash the revision order and allow the assessee’s appeal 7. In the result, appeal of the Assessee’s is allowed. Order pronounced in the Open Court on 20 .01.2025 Sd/- Sd/- (KRINWANT SAHAY) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT Dated: .01.2025 Pooja/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "