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TMI Blog2024 (8) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... stock") in order to generate bogus capital gains/losses. It was also informed that the assessee has sold one of the penny stocks named "Pine Animation Ltd" for a consideration of Rs. 4,39,75,148/- and declared Long Term Capital Gain of Rs. 4,37,82,238/-. The assessee claimed the same as exempt u/s. 10(38) of the Act. Based on the information so given by the Investigation Wing, the AO took the view that the Long Term Capital Gain declared by the assessee is not genuine one and accordingly reopened the assessment by issuing notice u/s. 148 of the Act. 3. It was noticed that the assessee had purchased 50000 shares of Pine Animation Ltd., for a consideration of Rs. 1.50 lakhs on 09-01-2013. Due to split of shares by the company, the assessee got five lakh shares in lieu of 50000 shares. The assessee sold all the shares during the period from 05-06-2014 to 15-09-2014 for an aggregate consideration of Rs. 4,39,75,148/-. Since the shares were held for more than one year, the assessee claimed the capital gain of Rs. 4,37,82,238/- as exempt u/s. 10(38) of the Act. 4. During the course of assessment proceedings, the AO extensively relied upon the report given by the Investigation Wing. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Hon'ble Supreme Court in the case of Sumati Dayal (214 ITR 801). 7. Accordingly, the AO held that the exemption u/s. 10(38) of the Act claimed by the assessee should be rejected. However, the AO assessed the entire sale consideration of Rs. 4,39,75,148/- as unexplained cash credit u/s. 68 of the Act. The AO also took the view that the assessee should have incurred expenses in procuring the bogus Long Term Capital Gains. The AO estimated the same at 5% of the sale consideration, which worked to Rs. 21,98,757/- and assessed the same as unexplained commission expenditure u/s. 69C of the Act. 8. In the appellate proceedings, the Ld.CIT(A) noticed that the AO has verbatim copied the report of investigation report and did not carry out any independent examination of the transactions of the assessee. He further noticed that the AO did not afford opportunity of cross examination of persons sought by the assessee, even though the AO had placed reliance on those statements. He also noticed that the AO did not show the cash trail of the transactions, i.e., the cash has been exchanged between the assessee and the operators. Accordingly, the Ld.CIT(A) deleted both the additions and hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no reason to suspect the genuineness of purchase and sale of shares merely on the basis of a generalised report given by the Investigation Wing. The Ld.AR further submitted that the assessee had sought for cross examination of the person on whose statement the AO had placed reliance. However, the AO has denied the opportunity of cross examination by placing reliance on a case law. Thus, there is violation of principles of natural justice also in making the impugned additions. The Ld.AR relied upon various decisions rendered by Mumbai Bench of the Tribunal and jurisdictional Hon'ble Bombay High Court to support her contentions. With regard to the decisions relied on by Ld. DR, the Ld. AR submitted that they have been rendered on the basis of facts prevailing in those cases and hence they will not apply to the facts of the present case. 11. We heard rival contentions and perused the record. We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkatta in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature. We notice that the investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been to have been endorsed. (c) the shares have been later dematerialised and kept in the Demat account. (d) the assessee has sold the shares through stock exchange platform (e) the assessee has received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group, which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee. 13. Both the parties relied on various case laws before us. We may refer to the some of the decisions rendered by Hon'ble jurisdictional Bombay High Court. In the case of Shyam Pawar (54 taxmann.com 108) (Bom), the Hon'ble Bombay High Court has observed as under:- "3. Mr.Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law." 14. In the case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No. 2012 of 2017 dated 4th March, 2022), the Hon'ble Bombay High Court has observed as under:- "2. We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instruction slips and also received payment from Kolkatta Stock Exchage. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal." 16. The Ld. DR has placed reliance on the decision rendered by the Co-ordinate Bench in the case of Hitendra C Ghadia(supra), wherein the Tribunal had confirmed the additions relating to long term capital gains arising on sale of penny stock. We have gone through the said order passed by the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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