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TMI Blog2022 (12) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowances of bogus trading loss of Rs. 36,29,308/- in penny stock as well as commission expenses of Rs. 72,586/- only. 4. The facts in brief are that the assessee in the present case is private limited company and engaged in the business activity of capital market. The assessee during the year traded in the scrip of Regency Trust Ltd. The assessee during the year sold 75763 shares of Regency Trust Ltd for Rs. 17,45,092/- out of opening quantity and purchases made during the year. In the process, the assessee incurred a loss of Rs. 36,93,308/- and claimed the same as trading loss. 5. The AO found that the company i.e. Regency Trust Ltd, incorporated in 1988 and registered as NBFC, was not having any significant business activity. The Regency Trust Ltd as on 19-01-2010 came with preferential allotment of shares. At the time of preferential allotment the scrip of Regency Trust was trading between Rs. 28 to 31 per share. Thereafter, the price of the impugned scrip suddenly sky rocketed and reached as high as to Rs. 111.5 per share as on 06-05-2011. Thereafter, the price of the impugned shares sharply decreased to the level of price before the preferential allotment. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found to be incorrect. In the said report there is no finding about the scrip of Regency Trust Ltd. The name of its stock broker was also not found in any report or statement. Till the date of passing of assessment order, no order by SEBI, BSE, RBI or any other order was passed against the scrip of Regency Trust Ltd. The AO made addition in arbitrary manner without having any material on record and thus the same needs to be deleted. 7.1 The learned CIT-A after considering the submission of the assessee and facts in totality deleted the addition made by the AO. 8. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 9. The learned DR before us vehemently supported the stand of the AO by reiterating the findings contained in the assessment order whereas the learned AR before us vehemently supported the stand of the ld. CIT-A by reiterating the findings contained in the appellate order. 10. I have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee claimed trading loss on sale of shares of Regency Trust Limited for Rs. 36,29,308/- which was treated as bogus and manipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13/- and 16,06,693/- in the F.Y. 2010-11 and 2011-12 whereas the trading loss was shown on the sale/ purchase of same script in the year under consideration and in subsequent years. The profit declared has been accepted by the Revenue but the loss has been denied. Therefore, once profit has been admitted as genuine in earlier year, then loss in the year under consideration and subsequent years from same scrip cannot be doubted until and unless some adverse materials are brought on record. As such, I note that the AO in the present case has taken contradictory stand. 10.2 It was also alleged that the price of the share of Regency Trust Ltd. was increased manifolds in a short period of time and there after decreased sharply which was not believed by the authorities below on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to the doubt about such increase in the price. But in our considered view, this cannot be a sole criteria for reaching to the conclusion that the price were rigged up to generate the long-term c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessee. 10.5 From the above, conduct of the assessee suggests that he was not involved in rigging or any wrongdoing. The case laws relied by the authorities below are distinguishable from the present facts of the case in so far there was no allegation against the company, its directors/ shareholders. 10.6 In my view, the trading loss generated by the assessee cannot be held as bogus only on the basis of the modus operandi, generalisation, and preponderance of human probabilities. In order to hold, the income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, it is not justifiable to link the fact or the finding unearthed in case of some third party or parties with the transactions carried out by the assessee. Further the case laws relied by the AO are with regard to the test of human probabilities which may be of greater impact but the same cannot used blindly without disposing off the evidence forwarded by the assessee. In simple words, there were not brought a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the grounds of Revenue's appeal are dismissed.
In the result, the appeal of the Revenue is dismissed.
Coming to ITA No. 1722 to 1724/Ahd/2019 an appeal by the Revenue corresponding to A.Y. 2014-15 to 2016-17.
11. At the outset, I note that the issues raised by the Revenue in its appeal for the AY 2014-15 to 2016-17 are identical to the issue raised by the assessee in ITA No. 1721/AHD/2019 for the assessment year 2013-14. Therefore, the findings given in ITA No. 1721/AHD/2019 shall also be applicable for the Assessment Years 2014- 15, 2015-16 and 2016-17. The appeal of the Revenue for the assessment 2013-14 has been decided by me vide paragraph No.10 of this order in against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the AYs 2014-15, 2015-16 and 2016-17. Hence, the grounds of appeal filed by the Revenue for AYs 2014-15, 2015- 16 and 2016-17 are hereby dismissed.
12. In the combined result, all the appeals of the Revenue hereby dismissed.
Order pronounced in the Court on 31/10/2022 at Ahmedabad. X X X X Extracts X X X X X X X X Extracts X X X X
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