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TMI Blog2022 (4) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 of the Act without properly considering the contention of the Respondent various judicial pronouncements relied upon by the Respondent the reassessment proceedings before the A.O as well as in the appellate proceedings before the Ld. CIT(A). 2. The Ld. CIT(A) after taking into consideration the submission of the Respondent and various judicial pronouncements relied upon by the Respondent held that the Respondent has been holding the shares of M/s. Suryanagri Finlease Ltd as promoter since 1994 which is a public listed company on the BSE and the AO has not doubted the purchase of shares. The AO has not brought out any material how the Respondent has brought its own unaccounted fund when the acquisition of shares has not been doubted and shares have been sold on stock exchange through proper banking channel. There is neither any statement of any persons mentioned through whom unaccounted money has been brought in nor has the AO brought any material on record to support his findings that there was collusion / connivance between the broker and the appellant for the introduction of his unaccounted money. In Respondent's case, there is no material to suggest that the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 which were rejected vide order dated 27-08-2018 and the ld. Assessing Officer held that the objection raised by the assessee are found to be untenable both in facts and in law. During the course of assessment proceedings, the Assessing Officer observed that the entire LTCG of Rs. 1,53,04,259/- was on account of sale of only one scrip namely M/s Suryanagari Fin-lease Ltd. The Assessing Officer observed that during F.Y. 2007-08 the assessee purchased 80,539 shares of M/s Suryanagari Fin-lease Ltd. and assessee had acquired 4,27,420/- shares of M/s. Suryanagari Finlease Ltd. between 1994 to 2007. The ld. Assessing Officer held that M/s Suryanagri Fin-lease Ltd is a penny stock used as an instrument to claim bogus LTCG and the price of such penny stocks are artificially raised in order to book bogus claim of LTCG. The Assessing Officer observed that during the period March, 2009 to March, 2018, M/s Suryanagari Fin-ease Ltd. had earned almost negligible income and therefore there is no economic rationale in sudden increase in the share price when there were no prospects of its sustainability. The ld. Assessing Officer also noted that during any particular year from March, 2010 to Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, the ld. CIT(A) held that the Assessing Officer in the instant set of facts was not justified to make addition u/s. 68 of the Act on sale of proceeds of shares of Rs. 1,96,04,023/- held for more than 13 years. The ld. CIT(A) deleted the addition and allowed the assessee's appeal by observing as below: 4.5. It is seen that appellant has been holding the shares of M/s. Suryanagri Finlease Limited from 1994 which is public listed company on BSE. The Assessing Officer has not doubted the purchase of share. The appellant has last purchased 80,539 shares of the company between 12/04/2007 to 12/06/2007 from the BSE stock exchange @ Rs. 12.29 to Rs. 14.80 per share. The appellant has sold 4,00,000 shares of the company through stock exchange at the price in the range of Rs. 47.45 to Rs. 49.95 per share during Financial Year 2012-13. The Assessing Officer has added entire sale proceeds of Rs. 1,96,04,023/- u/s. 68 of the I. T. Act, 1961 holding that appellant has brought its own unaccounted fund to its book. The Assessing Officer has not brought out any material how the appellant has brought out any material how the appellant has brought its own unaccounted fund when the acquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above facts, AO was not justified to make the addition u/s. 68 of the I. T. Act, 1961 of sale proceeds of shares of Rs. 1,96,04,023/- held for more than ten years. The addition made by the AO is accordingly deleted. The ground of appeal is accordingly allowed. 3.3 In the appeal before us, the Department drew our attention to observations made by the ld. Assessing Officer at page numbers 2, 11 and 12 (Para 5.4) of the assessment order wherein the ld. Assessing Officer has established that the assessee is engaged in the sale of penny stock and has made substantial capital gains using the medium of stock exchange. The ld. Departmental Representative placed reliance on the observations made in the assessment order to argue that ld. CIT(A) has erred in deleting the disallowance. Ld. DR asserted that it is beyond doubt that LTCG of Rs. 1,53,04, 249/- which is claimed as exempt by the assessee is nothing but the assessee's own unaccounted fund of Rs. 1,96,04,238/- (total sale consideration) brought back to its book using the scheme of accommodation entries. The Ld. AR of the assessee in response to drew our attention to page 37 of the paper book where in the reasons for reopening, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made by the assessee. In the present case, no material has been brought on record to suggest that purchase and sale of shares were bogus. The ld. Assessing Officer has not brought any material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money. In the present case, the transaction of purchase and sale of shares were duly supported by contract note, demat account and payments were made through banking channel. It would be useful at this stage to refer to some judgments which have dealt with the issue before us: (i) In the case of PCIT vs. Smt. Krishna Devi, ITA No.125/2020, the Delhi High Court vide order dated January 27, 2021 held that the fact that there was an astounding jump in the share price within two years, which is not supported by the financials, does not justify the AO's conclusion that the assessee converted unaccounted money into fictitious exempt LTCG to evade taxes. The finding is unsupported by material on record & is purely an assumption based on conjecture. The relevant extract of the judgment is reproduced for ready reference: 12. Mr. Hossain's submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that he bought & sold the shares. The AO has only relied upon the report of the investigation wing alleging the transaction to be bogus. The ITAT held that the AO ought to have examined a number of issues (which are enumerated in the order) and shown that the transaction is bogus. The capital gains are genuine and exempt from tax. (v) The Mumbai ITAT in the case of Vijayrattan Balkrishan Mittal vs. DCIT, ITA No.3311/Mum/2019 held that the fact that a scam has taken place in some penny stocks does not mean that all transactions in penny stocks can be regarded as bogus. In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behavior, modus operandi etc. The AO has to show with evidence the chain of events and live link of the assessee's involvement in the scam including that he paid cash and in return received exempt LTCG gains. In view of the above judicial as applied to the assessee's set of facts which we have discussed above, in our view, the ld. CIT(A) has not erred in facts or in law in deleting the addition u/s. 68 of the I.T. Act. 5. In the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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