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TMI Blog2024 (8) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee name has been surfaced and a detailed finding has been given by the Investigation Wing." 2. "On the facts and the circumstances of the case and in law the LD. CIT (A) has not appreciated the facts that in such penny scrip, trading transactions of purchase and sales are not effected for commercial purpose but to create artificial gains and complete the cycle of circular trading with a view to evade taxes." 3. "On the facts and the circumstances of the case and in law the LD. CIT (A) erred in getting the facts that transaction of shares of such penny scrip are not governed by market factors prevalent at relevant time rather transactions are product of design and mutual connivance on part of assessee and operators." 4. "On the facts and the circumstances of the case and in law the LD. CIT (A) erred in deleting the addition of Rs. 62,45,275/- made u/s.68 of the I.T. Act, 1961 being sale proceeds of the Scrip and Rs. 1,87,358/- made u/s. 69C of the I.T. Act, 1961 without appreciating that statement of various relevant person admitting that these companies were indulged in giving accommodation entries, abnormal rise in price over short period, cash trails in the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Re.1/- each on 10.04.2013. Assessee sold these shares during the year on the platform of Bombay Stock Exchange (BSE) through SEBI registered broker. This entire factual matrix is presented by the chart reproduced below: Buy Sell Date of purchase/sale Quantity Rate Amount Quantity Rate Amount Gain 17.02.2012 1000 250 2,50,000 100000 62,45,275 59,76,790 (bonus shares issued in the ratio of 9:1) 9000 Shares subdivided into Rs. 10 to 1 90,000 1,00,000 100000 3.2. Case of the assessee was taken up for reassessment on the basis of investigation by the DDIT (Inv.), Kolkata. In the course of assessment, Ld. Assessing Officer called for details and explanations in respect of the transaction of sale of shares on which exemption has been claimed under section 10(38) on account of long-term capital gain earned by the assessee. To corroborate the facts, assessee furnished the relevant documentary evidences which are placed on record in the paper book before us, containing 70 pages, which includes: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to him were running the racket of providing accommodation entries by manipulating the share prices of alleged penny scrip of the Surbhi Chemicals & Investments. Ld. Assessing Officer noted that statement of these various persons were recorded during the course of survey/search operations undertaken by the DDIT (Inv.), Kolkata and Mumbai to state that they had provided accommodation entries in the alleged penny scrip. 4. Ld. Assessing Officer, after considering the submissions made by the assessee, arrived at the adverse conclusion by observing that there is unusual rise in the price of the shares sold by the assessee which has been investigated by the Investigation Wing of the Department to establish that cash has been routed from various accounts to provide accommodation to the assessee and that assessee had failed to discharge her bonus to prove the unusual rise and fall of share prices. Ld. Assessing Officer placed heavy reliance on the doctrine of preponderance of human probability to hold that the assessee is indulged in bogus and dubious share transactions since she had not been able to adduce cogent evidences in this regard. 4.1. It is worth noting that before d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition, there are no discrepancies pointed out by the Assessing Officer in the documents and the details furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case. 7. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp movement in the share prices of the aforesaid s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have not been identified even though notices were issued u/s. 133(6) of the Act. In this context, it is worth noting that impugned share sale transactions undertaken by the assessee are on the online digital trading platform of stock exchange of BSE which is a regulated market under the aggies of a regulator viz. SEBI. There is nothing on record from the market regulator SEBI for the relevant period which establishes the 'tainted' status of the scrip involved in the present case, so as to hold the share sale transactions as bogus/accommodation entry as alleged by the ld. AO. It is also important to note that the operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Further, sale proceeds are received through the stock market process into the pre-identified bank account of the seller i.e., the assessee which cannot be tainted as 'unexplained or unaccounted or undisclosed' money for the addition made u/s. 68 by the ld. Assessing Officer. 8.1. Section 68 of the Act essentially requires the assessee to explain the nature and source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prices. d. received the sale proceeds through stock market process in his bank account. 10. We note that ld. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless. We also note that ld. Assessing Officer did not allow the assessee to cross examination the parties whose statements were relied upon by him for drawing the adverse conclusion. Such an approach adopted by ld. Assessing Officer is not in compliance with the provisions of section 142(3) of the Act which is a statutory mandatory procedural requirement for making a valid assessment. We note that the required compliance with section 142(3) has not been met. 11. As already noted above, ld. Assessing Officer has referred to the theory of preponderance of probability which according to us is applied to weigh the evidence of either side and draw a conclusion in favour of a party which has more favourable factor in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs." ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: "Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason to add capital gains as unexplained cash credit under section 68" iii) CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom) wherein it was held: "Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68" 13. In the course of hearing before us, Ld. Sr. DR placed reliance on various judicial precedents including that of Hon'ble High Court of Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that construction that is favourable to the assessee should be adopted. Hence by following this principle, reliance placed by ld. Sr. DR on the above referred decisions do not hold their fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of Surbhi Chemicals & Investments Ltd. 14. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as discussion and observations made herein above, we uphold the finding arrived at by the ld. CIT(A) and accordingly delete the addition made u/s 68 towards proceeds of sale of listed shares of Surbhi Chemicals & Investments Ltd. which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the Revenue in this respect are dismissed. 15. Addition made by the ld. Assessing Officer on estimate basis towards commission for arranging alleged artificial capital gains @ 3% amounting to Rs. 1,87,358/- is consequential to the addition made towards re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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