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TMI Blog2025 (5) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case in law, the Ld. CIT(A) erred in not appreciating remand report whereas Ld. A.O. himself agreed for removal for purchases cost from gross value of sale proceeds received from sale of shares. It is a pure and simple case of non-application of mind by the First Appellate Authority. 5. On the facts and circumstances of the case in law, the Ld. CIT(A) erred in not considering submission as well as evidences produced before him. 6. On the facts and circumstances of the case in law, the Ld. CIT(A) erred in confirming addition of Rs. 11,97,290/- which is bad in Law." 7. "On the facts and circumstances of the case in law, The Ld. CIT(A) erred in confirming addition of Rs. 23,945/- which is bad in Law. 8. The Assessee has right reserve to Amend modify delete and make any additional grounds of appeal." 2. Brief facts of the case as extracted from the orders of lower authorities are that assessee is a Senior Citizen and a retired Central Government employee, filed his return of income for A.Y. 2012-13 on 17.09.2012 declaring income of Rs. 14,23,340/-. In the computation of total income, the assessee apart from income from 'salary, 'other sources' also have sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer finding are based on his statement recorded during search action, wherein statement of Naresh Jain was recorded about modus operandi of price rigging of various scrips. According to his statement the scheme involved acquiring of listed companies, artificially manipulating their share price and providing accommodation entries to beneficiaries through preferential allotment of share or market operations. The assessing officer also relied on the statement of other directors in the entities of Shri Naresh Jain. On the basis of such statement and finding of investigation wing, the assessing officer made two additions in the return of income of assessee and added the amount of Rs. 11,97,290/- under section 68 on account of sale of shares of Divine Multimedia (India) Ltd. And also added commission income @ 2.00 % of sale consideration of shares. The assessee also stated that he is a Senior Citizen and a retired Government Officer. The addition in his assessment is based on third party statement, no independent enquiry was conducted by assessing officer no specific evidence for linking the addition for price manipulation is brought on record. The statement recorded by Investigation Win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot specify direct role of assessee. Neither (SEBI) Security Exchange Board in India nor any agency has initiated an action against assessee. It is established principle in taxation that once department accepted the genuineness of purchase, the corresponding sale cannot be doubted. AO has accepted purchases as genuine. 5. The ld CIT(A) on considering the assessment order, submissions of assessee and remand report of assessing officer, upheld both the addition by taking a view that the assessment proceeding were initiated lawfully and notice under section 148 was duly issued and served. The assessee failed to provide any cogent evidence to cogence the legality of notice. Sufficient opportunity was given to assessee from time to time and there is no denial of opportunity of hearing. The finding of investigation wing reveals that Divine Multi-media (India Ltd.) was used for accommodation entry. The claim of assessee that transaction was genuine and through stock exchanges was found unsubstantiated as 68 applies when identity, credit worthiness and genuineness was not established. The submission of independent enquiry is not conducted is misplaced as reliance on creditable external rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing Central Government employee, the assessee informed respective higher authorities about his investment. The assessee is a genuine purchaser. During assessment the assessee sought time to file complete evidence and file application for seeking time, copy of one of such application is filed on record vide page No. 9 of paper book. The AO instead of considering the plea of assessee held that the assessee has not filed any reply. Before ld CIT(A, the assessee filed complete details with his submissions. The ld CIT(A) has not considered the submission of assessee and confirmed addition with pre-determined notions without appreciation of facts in a proper way. The Ld. AR for the assessee submits that assessee furnished completed details about LTCG earned on sale of share held more than 12 months and payment made through banking channel. The assessee has paid security transactions tax (STT) and surplus earned on such sale was claimed as exempt income under section 10(38) of the Act. The sale of shares was made through BSE and all necessary evidence to substantiate the genuineness of such transactions was furnished before lower authorities. The Assessing Officer mainly acted on the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al loss or business loss to various beneficiaries. The said group was involved in trade of scripts of shares of seven companies; one of such company was Divine Multimedia (India) Ltd. As per information, the assessee was also beneficiary of sale of shares of Rs. 11,97,290/- of Divine Multimedia (India) Ltd. Thus, the capital gain shown by the assessee during the relevant financial year was nothing but result of penny stock entry. The evidence collected during search action proved beyond doubt that Divine Multimedia (India) Ltd was penny stock company, shares of which was utilised by Naresh Jain and his group by price rigging for the purpose of providing entry of bogus capital gain. Once it is proved on the basis of report of investigation wing that the assessee is beneficiary of penny scrips, whose price were manipulated by malpractices and resultant benefits are on account of manipulative practice are also to be treats as tainted. To support his submissions, the ld Sr DR for the revenue relied on the decisions of Kolkata High Court in Swati Bajaj (2022) 446 ITR 56 (Kol)/ 288 Taxman 403 (Kol). 8. We have considered the rival submission of both the parties and have gone through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anything to be added, it is the only profit element, but entire sale consideration cannot be added. He has also presumed that certain commission was paid for arranging the transaction without naming the person and mode of payment. All these aspects show non-application of mind of the part of appellant. e) To make an allegation that a particular share is penny stock or price manipulations are done, one has to look into financials of the company during the year under consideration. If analysis is done from this angle, in the last two years (A.Y. 2011-12 and 2012-13), the company M/s. Divine Multimedia Ltd. had a turnover of more than Rs. 40.00 crore a net profit of approximately Rs. 55.00 lakhs with a share capital of Rs. 6.69 crore and Reserves of approximately Rs. 18.00 crores. Hence, in the impugned year, the company cannot be treated as a non-descript company nor the share can be labelled as penny stock. Hence, the assumption of AO that the same is a penny stock is factually incorrect. 10. To sum up, the share is neither a penny stock in the impugned assessment year, nor the additions made by the AO can be sustained due to the above mentioned reasons. The additions made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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