TMI Blog2023 (9) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has transacted also does not support the case of the Revenue, as no material has been brought on record to show that the assessee was involved in such price manipulation even after purchasing and selling the shares on the stock exchange through a SEBI registered stock-broker. As in the statement recorded of the Authorised Representative of the assessee during the assessment proceedings, it was specifically submitted that the assessee has never invested through preferential allotment and also disclosed the name and address of the broker, i.e. HDFC Securities Ltd. However, the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus - Decided in favour of assessee. - Shri Prashant Maharishi, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Appellant : Shri Suresh Kumar Nair For the Respondent : Shri Prasoon Kabra ORDER The present appeal has been filed by the assessee challenging the impugned order dated 16/12/2022, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by placing reliance upon the investigation carried out by the Directorate of Investigation, Kolkata in relation to 84 penny stocks, the financial position of the Companies in whose shares assessee has transacted and fluctuation in the share rates in a short span of time concluded that the assessee has earned long-term capital gains from the sale of penny stocks. Accordingly, the AO disallowed the exemption of long-term capital gains claimed under section 10(38) of the Act and made the addition of Rs.5,47,190, under section 68 of the Act. 5. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee, by observing as under:- 5.1 I have carefully considered the assessment order and the submissions of the appellant. The ground No. 1 to 3 of appeal relate to addition of Rs.5,47.190/- as unexplained cash credits u/s 68 of the Act which has been claimed as exempt u/s.10(38) of the I.T. Act, 1961. Brief facts of the case are that during the year, the assessee has declared income of Rs.20,480/- by filing the ITR online on 13.04.2015. The appellant has also shown long term capital gains of Rs.5,47,190/- and claimed it as exempt u/s 10(38). The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and therefore, deserve to be deleted. The appellant tried to explain the issue through certain case laws but the factual matrix is entirely against the appellant. The case laws cited by the appellant are on distinguished facts, hence, not applicable in the instant case. The landmark decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 is squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. 5.5 In this case, the AO has worked out the glaring facts, which cannot be ignored and which are clear indicative of the non-genuine nature of the transactions. The appellant could not satisfactorily explain how the investments in the absence of any evidence as to the financials, growth and operations of the company could earn such huge profit. The financials of the company proving that the entity is a penny stock company. Regarding the failure to accord the opportunity of cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry operator by rigging prices at astronomical rate shows that the AO has been compelled to examine the entire transactions in the light of the surrounding circumstances and has unearthed the bogus transaction of purchase and sale of shares which was not real and appellant has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not beyond human probabilities. 5.9 Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the appellant are a part of major scheme of the accommodation entries and keeping in view the ratio of the judgments quoted above, I am convinced with the findings of AO and don't intend to interfere. In my opinion, the transaction is stage-managed to get benefit u/s.10(38) and the same is not permissible under the Act. In the circumstances, the addition made by AO u/s. 68 is hereby confirmed and ground No.1 to 3 of appeal are dismissed. Being aggrieved, the assessee is in appeal before us. 6. We have considered the submissions of both sides and perused the material available on record. As per the assessee, she is a housewife and used to invest small a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee also transacted in shares of companies other than Nouveau Multimedia Ltd. The assessee has also placed on record the statement of the Demat account, which she held along with her brother, forming part of the paper book on pages 42-43 regarding the transaction in shares of Pearl Agriculture Ltd and Pearl Electronics Limited. We find that the assessee vide her submission dated 17/08/2016, specifically submitted before the AO that investment has also been made in Mothoot Finance Ltd. Further, the assessee specifically submitted that the purchase as well as the sale of shares, which are doubted by the Revenue are not a private placement/off-market transaction, rather the same was made on the stock exchange through the SEBI registered and reputed broker, namely HDFC Securities Ltd. 7. We find that the AO without commenting on any of the evidence submitted by the assessee placed reliance upon the report of the Investigation Wing, Kolkata, and the price fluctuation of shares of the entities in which the assessee has transacted. The findings of the Investigation Wing, as noted on pages 3-4 of the assessment order, appears to be mere general findings of the investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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