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TMI Blog2024 (7) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020-21. 2. The solitary issue in this appeal is the addition made u/s. 68 of the Act on the sale of shares of M/s. International Conveyors Ltd. amounting to Rs. 6,64,96,351/- to be an 'unexplained source of investment' made by the assessee along with the other consequential grounds. The assessee has also raised the additional grounds which are connected to be regular grounds and are, therefore, admitted for adjudication. 3. Briefly stated the assessee is a portfolio investor registered with Securities and Exchange Board of India (SEBI) and is a tax resident of Mauritius. The assessee had filed its return of income declaring total income at Rs. 6,59,33,460/-. The assessee's case was selected for scrutiny for the reason that the ld. A.O. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold a total shares of value amounting to Rs. 293,08,21,323/- in which the sale of the impugned order constitute only 2.27% of the total sale value. The ld. AR also contended that being a tax resident of Mauritius, the assessee was exempt to the capital gain income as per Indo-Mauritius DTAA substantiating that there was no necessity of the assessee to get into the bogus transaction. The ld. AR brought our attention to the audited financials, the share holding pattern of ICL and stated that the said scrip is not a penny stock as alleged by the department. 6. The learned Departmental Representative ('ld. DR' for short), on the other hand, controverted the said facts and stated that these are not genuine transactions and are merely t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the warrants and had subsequently converted the same into shares in 2009 which was sold only during A.Y. 2020-21. The assessee is said to have furnished the bank details of the said payment along with FIRC copy issued to M/s. International Conveyors Ltd. for receipt of funds against preferential allotment of warrants. The assessee further stated that the said script was listed on Bombay Stock Exchange (BSE) and also subsequently got listed on NSE also. The assessee contended that the assessee has invested/transacted in several other scrips during the year under consideration which aggregates to Rs. 293,08,21,323/- in which only 2.27% of the total sale value is that of the alleged scrip which is held to be a penny stock by the lower au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be applicable to a non resident where the assessee was benefited by Indo- Mauritius DTAA as per section 90 of the Act and the same was disposed off against the assessee by stating that section 115BBE of the Act or section 68 of the Act was applicable to the assessee in case where Mauritius had no such tax on deemed income. The Hon'ble DRP further stated that the unexplained income was very much taxable in India as per Article 22 of the protocol dated 10.12.2016 where the other income/residuary income is taxable in India. It further held that incase of irregularity/money laundering, section 68 would be applicable even to a non resident and not the Articles of DTAA. 9. In the above factual matrix of the case, it is to be noted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. AR has placed reliance on the decision of the Hon'ble High Court of Gujarat in the case of Pr. CIT vs. Jagat Pravinbhai Sarabhai [2022] 142 taxmann.com 247 (Guj) where it has been held that the shares were retained for more than 10 years and sold after a long time which infer that the investment was not bogus and the scrip was held to be not a penny stock. It was also held that such investments are not merely for the purpose of earning exempt income but is a genuine transaction. The ld. AR also relied on the decision of Hon'ble High Court of Gujarat in the case of Pr. CIT vs. Sangeeta Ben Jagdish Shah wherein it was held that where the assessee had given the complete details of the transaction, the same cannot be held to be a ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of acquisition for the shares while determining the bogus long term capital gain.... 11.2 It was alleged by the AO that the price of the share of M/s Shree Nath Commercial & Finance Ltd., increased in a short period of time which is not in commensurate to the financial performance of the company. The rise in the price of the scripts of a company, having no financial base/business activity/profatibility 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 bogus long-term capital gain was generated which is exempted under section 10(38) of the Act. Such observation during the assessment proceedings provides reasons to invest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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