TMI Blog2022 (6) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... the introduction of his own unaccounted money. In the present case, despite the assessee s specific request, no opportunity of cross examination was provided to the assessee on the basis of whose statements reliance has been placed to hold that the sale of shares was sham / bogus. - Decided in favour of assessee. - ITA No. 576/Ahd/2020 - - - Dated:- 15-6-2022 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Chetan Agarwal, A.R. For the Revenue : Shri Atul Pandey, SR-D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ahmedabad in Appeal no. CIT(A), Ahmedabad-5/10663/2017-18 vide order dated 24/09/2020 passed for the assessment year 2015-16. 2. The Revenue has raised the following grounds of appeal:- (1) The Ld.CIT (A) has erred in law and on facts in allowing the claim of disallowance amounting to Rs. 18,54,800/- under section 10(38) of the I. T. Act and deleted the addition made u/s. 68 of the I.T. Act. (2) Ld. CIT(A) has grossly erred in facts and in law for the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Asian Ltd., and added the total sale proceeds amounting to _ 18,54,800/-as unexplained cash credit u/s 68 of the Income Tax Act, 1961 (Act). While making the above additions, the Ld. Assessing Officer made the following observations: 18. The above detailed discussion, in the preceding paragraphs, shows that the investments made in the shares of Conart Traders (later amalgamated in Sunrise Asian), is bogus and non genuine transactions. The assessee has evaded taxes due' on such unaccounted income by taking the services of bogus accommodation entry providers and claiming bogus long term capital gains as exempt income. It is seen that the modus operandi was to purchase physical shares of Conart Traders along with backdated bogus purchase bills, which showed that the shares had been purchased at very low prices. The prices of these shares were then artificially raised through circular transactions of sale and purchase of these shares- financed through unaccounted money. These shares were sold on the stock exchange platform at a peak, with the beneficiaries booking profit and thereby booking fictitious long-term capital gains. The genuineness could validly be tested on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The details are contained in para 6.1 of assessment order. There are number of cases favouring the contention raised by the appellant such as: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx I have perused various case laws on the issue involved. In my opinion all transactions carried out in penny stock cannot be held blindly as bogus without appreciating evidence of record such as bank statement, entry in demat account which cannot be manipulated by anyone. Moreover, the purchase of share was before the merger of the original merged company and there is plethora of evidences that the purchase has happened much before the merger. The shares have been held for more than 12 months by the appellant, therefore are eligible for LONG TERM CAPITAL GAIN. Relying upon the ratio of decisions (supra) as well as the documents on record, in my opinion conditions to invoke provisions u/s.68 are not existing in this case. Consequently the addition of Rs.18,54,800/- is hereby deleted. The Ground No.1 is allowed. 6. The Department is in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares was not doubted and shares have been sold on Stock Exchange. Further, the ld. Assessing Officer has not brought on record statement of any persons through whom assessee s own unaccounted money has been brought in. As stated above, the appellant has held the shares for over 3 years and it would be incorrect to treat sale of shares as bogus merely on the basis of suspicion and on account of fact that a substantial quantum of capital gains has been 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, despite the assessee s specific request, no opportunity of cross examination was provided to the assessee on the basis of whose statements reliance has been placed to hold that the sale of shares was sham / bogus. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities. The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. (iv) The Delhi ITAT in the case of Suresh Kumar Agarwal vs. ACIT, ITA No 8703/Del/2019 held that the assessee has produced contract notes, demat statements etc discharged the onus of proving 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 gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the transaction in question was a part of penny stock scam. So, in view of the cases discussed in the foregoing paras, particularly the ratio laid down by the Hon ble Supreme Court in the case of M/s Andaman Timber Industries (supra), we are of the considered view that the Ld. CIT (A) has wrongly confirmed the assessment order passed by the AO in violation of the principles of natural justice. Hence, the impugned order passed by the Ld CIT (A) suffers from legal infirmity. We, therefore, allow the sole ground of appeal of the assessee and set aside the impugned order passed by the Ld. CIT (A). Accordingly, we direct the AO to allow the claim of the assessee. 6. The ld. Departmental Representative has failed to controvert the findings of Tribunal in the case of Shri Narayan R. Rathi whose case is on the same pedestal with identical set of facts. In fact a perusal of the assessment order in the case of assesse reveal that the Assessing Officer in para 8.3 has observed that 3000 shares were jointly held by the assesse and Narayan Ramachandra Rathi. The facts of present case are similar to the facts of case in the case of Narayan R. Rathi decided by the Co-ordinate Bench. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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