ASHWIN KUMAR AGARWAL,CUTTACK vs. DCIT ASMNT CIRCLE-2(1)CUTTACK, CUTTACK

आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण, कटक कटक �यायपीठ �यायपीठ,कटक आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण कटक कटक �यायपीठ �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आयकर अपील संसंसंसं/ITA No.507/CTK/2024 (िनधा�रण िनधा�रण िनधा�रण वष� िनधा�रण वष� वष� / Assessment Year : 2016-2017) वष� Ashwin Kumar Agarwal Vs DCIT, ASMNT Circle -2(1), Plot No 1554/B, Sector-6 Cuttack B/H DAV Public School, Abhinab Bidanasi 753014, PAN No. :AISPA 7337 C (अपीलाथ� अपीलाथ� अपीलाथ� /Appellant) अपीलाथ� (��यथ� ��यथ� ��यथ� / Respondent) ��यथ� .. िनधा�रती िनधा�रती क� िनधा�रती िनधा�रती क� क� ओर क� ओर ओर सेसेसेसे /Assessee by ओर : Shri Mohit Sheth, Advocate राज�व राज�व क� राज�व राज�व क� क� ओर क� ओर ओर सेसेसेसे /Revenue by ओर : Shri S.C.Mohanty, Sr. DR सुनवाई क� तारीख / Date of Hearing : 13/12/2024 घोषणा क� तारीख/Date of Pronouncement : 13/12/2024 आदेश आदेश / O R D E R आदेश आदेश Per Bench : This is an appeal filed by the assessee against the order of the ld.CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 17.10.2023, passed in Appeal No. CIT(A), Cuttack/10192/2018-19 vide DIN & Order No.ITBA/NFAC/S/250/2023-24/1057140507(1) for the assessment year 2016-2017. 2. The assessee has taken the following grounds of appeal :- 1. For that under the facts and the circumstances of the case the addition of Rs.65,55,972/- (Entire Sales proceeds of shares of Ejecta Marketing Limited earlier referred as Appu Marketing Limited) as made u/s.68 is arbitrary, unlawful and unjustified. The learned CIT(A), NFAC, Delhi was not justified in rejecting the claim of the assessee regarding exemption u/s.10(38) with regard to alleged income under the head Long Term Capital Gain of Rs.65,55,972/- without properly appreciating the submission and documents furnished by the Appellant. 2. For that under the facts and the circumstances of the case the CIT(A) was not justified in disallowing the claim of the appellant regarding Long Term Capital Gains by ignoring the evidences and submissions made by the appellant.

2 ITA No.507/CTK/2024

return of income on 21.12.2016 declaring total income of Rs.18,10,010/-.

The assessee was taken for scrutiny and the assessment was completed

vide order dated 27.12.2018 u/s. 143(3) of the Act at a total income of

Rs.1,20,99,520/- by making various additions to the income declared by

the assessee. In first appeal, Id.CIT(A) has allowed partial relief and

confirmed the addition of Rs.69,39,513/- by holding the long term capital

gain declared by the assessee and claimed exemption u/s. 10(38) of the

Act as undisclosed cash credit u/s. 68 of the Act.

appeal, assessee was engaged in the business of partnership firm M/s.

Sonthalia Rice Mills. Besides this the assessee is also continued

transacted in shares from which Long Term Capital Gain of

Rs.69,39,513/- was declared and claimed as exempt u/s.10(38) of the

Act. During the course of proceedings before the lower authorities, the

assessee had filed all the details with respect to the purchases of shares,

3 ITA No.507/CTK/2024

sales of shares, copy of Demat account etc and also submit a detailed

chart of lthe computation of LTCG on each script which is reproduced at

Pg 4 & 5 of the Id. CIT(A) order. According to this chart during the year

under appeal assessee has transacted in shares of 12 companies and

earned net long term capital gain of Rs. 69,39,513/- which include long

term capital gain of Rs. 66,55,972/- earned from the sales of share of one

company M/s. Appu Marketing Manufacturing Limited now known as

Ejecta Marketing Limited. The AO has treated entire capital gain as

undisclosed income of the assessee however, ld CIT(A) has held the

LTCG from the sale of shares of M/S Appu Marketing Manufacturing

Limited as bogus and deleted the remaining addition. The Ld.AR submits

that the AO while making additions has also referred assessee's own

case for A.Y. 2015-16 where the LTCG from the sales of shares of two

companies namely GCM Security Limited and Kailash Auto Finance

Limited totaling to Rs. 59,00,427/- was held as bogus long term capital

gain. He further submits that in the preceding years that is in A.Y. 2014-15

and 2015-16, this bench of ITAT vide its order dated 30.5.2023 in the

case of the assessee himself, has held that such capital gain is genuine

and deleted the additions so made. He further submit the assessee has

purchased the shares after making the payments through banking

channel and the shares was held by the assessee in his Demat account

for a period of more than one year before making sales through

recognized stock exchange. He has filed the copy of purchased bill,

Demat account statement and contract notes towards sale of shares to

4 ITA No.507/CTK/2024

establish that due STT was paid at the time of sale. All these documents

were also filed before the lower authorities and are available in the paper

book Pg 4 to 23. He finally referred a chart as referred hereinabove with

regard to the computation of long term capital gain and short term capital

gain earned from the sale of shares of various conditions which is at

paper book Pg. 24.

preceding years, the issue of long term capital gain has been decided by

this bench of ITAT in case of other assessee’s also which orders have

been confirmed by the Hon'ble High Court of Orissa at Cuttack. The

assessee has filed a copy of the order passed by the Hon'ble High Court

of Orissa in ITA No. 23 of 2022 in the case of Pr.CIT-1 Vs. Kuntala

Mohapatra dated 9.2.2023 and further submit that against the said order

SLP filed by the revenue stood dismissed by the Hon'ble Supreme Court

in SLP (Civil Diary No. 5269/2024) dated 4.2.2024, copy of which is

placed on record. Ld.AR further submit that Hon'ble High Court of Orissa

in the case of Pr.CIT Vs. Bimala Devi Singhania vide order dated

10.10.2023 also confirmed the order of tribunal holding that once the

assessee has discharged its burden of established that the transactions in

shares is done through online and payments were made through banking

channel and assessee has duly complied with all the conditions for

claiming exemption u/s. 10(38) of the Act, such LTCG should be treated

as genuine. In the present case also, the assessee has duly filed all

plausible evidences towards the long term capital gain from the sale of the

5 ITA No.507/CTK/2024

shares of M/s. Appu Marketing Manufacturing Limited now known as

Ejecta Marketing Limited and therefore the ld. AR prayed that action of

the lower authorities in holding the same as bogus long term capital gain

deserves to be struck down and the assessee be allowed exemption u/s.

10(38) being a genuine long term capital gain.

of the lower authorities and submits that the assessee has failed to

establish the transaction of long term capital gain as genuine before the

lower authorities. He further submits that the AO in its order has observed

that the assessee has received more than Rs. 73 Crore from the sale of

“future” which was claimed as invested in the acquisition of shares and

also as the source of capital introduction in the partnership firm. The Id

Sr.DR further submits that in the case of the firm an addition of

Rs.89,69,000/- was made on account of capital introduction by the

assessee as unexplained credit in the hands of the firm which therefore,

established that the assessee has not been able to prove the

genuineness of the source of the capital introduced in the partnership

firm. The Id Sr. DR further submitted that the Id CIT(A) while confirming

the addition had also referred the orders of the Securities & Exchange

Board of India (SEBI) wherein the SEBI in the case of M/s Appu

Marketing Manufacture Limited (now known as M/s Ejecta Marketing

Limited) has imposed penalty of Rs.5 Lakhs u/s 15J and 15-I of the SEBI

Act read with rule 5 of Prohibition of Fraudulent and Unfair Trades relating

to the security markets. He thus, submitted that all the circumstantial

6 ITA No.507/CTK/2024

evidence in the matter and surrounding circumstances clearly established

that the capital gain declared by the assessee is not genuine and claimed

by the assessee as exempt income u/s. 10(38) to convert his undisclosed

money in the grab of long term capital gain. He also relied upon by

various judgments relied on by the Id CIT(A) at the time of confirming the

addition in the hands of the assessee on this score.

assessment order and appellate orders passed in the case of partnership

firm M/s Sonthlia Rice Mills, Cuttack wherein addition of Rs.89,60,000/-

made u/s.68 of the Act on account of capital introduction by the assessee

in firm were deleted by the ld. CIT(A) vide order dated 22.09.2020 in IT

Appeal No 0203/2018-19. The ld. AR further submitted that against this

order of ld. CIT(A), the department has preferred appeal before this

Bench, who vide its order dated 17.05.2022 passed in ITA

No.29/CTK/2021 has dismissed the appeal of the revenue and upheld the

order of the ld. CIT(A) deleting the additions so made. The Id AR,

therefore, submitted that the allegation of the revenue as well as the

argument put forth by the Id Sr. DR that the assessee has failed to

establish the genuineness the source of capital introduction as claimed

out of the long term capital gain hold no water and the long term capital

gain declared by the assessee should be held as genuine long term

capital gain. He further filed the written submission in the paper book

page 1 to 3 which reads as under :-

7 ITA No.507/CTK/2024

Written Submission Per AO-

Rejected the claim of Exemption u/s.10(38) in respect of Long Term Capital Gains arising on the sale of shares. Assessment made u/s.143(3) dt.27.12.2018. CIT(A)-

The contention of the appellant that the Hon'ble ITAT has allowed relief to the appellant in the AY-2015-16 on account of sale of shares of two companies viz GCM Security Ltd. and Kailash Auto finance Ltd is not applicable to the year under consideration as the shares are of different companies. Appellant Contentions -

The assessee is an individual deriving income from a partnership firm and also earns on income from other sources. Return of income for the aforesaid asst. year was filed on 21.12.2016. In the return of income the assessee claimed exemption u/s.10(38) arising out of long term capital gains. The return of the assessee for the aforesaid Asst. Year was selected for scrutiny. The AO passed the assessment order entirely on surmises and suspicion and without any concrete basis.

The AO action as stated was based entirely on surmises and suspicion and at the same time the AO was unable to rebut the concrete evidence tendered by the assessee in support of his claim. All the materials were furnished during the course of assessment and was duly taken into account by the AO. The same evidences (Records) were duly present before the CIT(A) and CIT(A) adjudicated the assessee's case sustaining the addition made by the AO saying that shares are of different companies in comparison to earlier year case. Hence the citations given by the assessee in his own case for the Asst. Year 2015-16 judicially pronounced by the Hon'ble Jurisdictional ITAT Cuttack Bench, Cuttack is not applicable in the appellant case. This shows that the CIT(A) agreed to the claim of exemption u/s. 10(38) regarding the capital gains as being genuine but since the shares are of different companies the CIT(A) sustained the addition. So it shows that the basis of sustaining the addition by the CIT(A) is arbitrary, unlawful and unjustified.

The assessee purchased 10000 shares of M/s. Appu Marketing And Manufacturing Limited on 02.09.2013 for Rs.1,00,000/- (payment made by cheque). Shares of the M/s. Appu Marketing And Manufacturing Limited were registered with Stock Holding Corporation of India Limited for demat purpose. Shares of M/s. Appu Marketing And Manufacturing Limited were sold through broker Alankit Assignment Limited,. (A

8 ITA No.507/CTK/2024

SEBI authorized Broker). Securities Transactions Tax (STT) had been duly levied on these transactions.

The details were duly furnished before the AO and as well as CIT(A).

The learned AO held the entire sale proceeds of shares of Rs.69,39,513/- as Income from Other Sources and not from Capital Gains and treated the entire amount as unexplained cash credit u/s. 68 of the I.T. Act. The CIT(A) during the course of hearing deleted the amount of Rs.3,83,541/- arising as long term capital gains on account of sales of other shares and stated eligible for exemption u/s. 10(38) of the I.T. Act and sustained the addition of Rs.65,55,972/- (i.e Rs.69,39,513 Rs.3,83,541) (which is also a long term capital gains arising out of sale of shares and has been claimed as exemption u/s. 10(38)). The difference of opinion for each shares by the CIT(A) is not understandable and also unjustified. In addition to above, copy of the CIT(A) Order and Hon'ble Jurisdictional ITAT Order for the Asst. Year-2015-16 was furnished before the CIT(A) during the course of appeal proceedings. The Ld. CIT(A) stated that during the Asst. Year 2015-16 the sale of shares were of different companies and during the year under consideration the sale of shares are of different companies. Hence the citations given by the appellant is not applicable in this case. The shows that the CIT(A) decides on the basis of companies shares sold.

The appellant begs to submit that the reasonings and conclusions of the learned AO is not based on facts but on mere theoretical discussions and also the finding and the conclusion given by the CIT(A) is also arbitrary, unjustified and unlawful and also somehow confusing. The appellant, however, furnished all the details of purchase and sale of shares. Such sale was made through authorised share-broker Alankint Assignment Limited and the sale proceeds were received through appellant's Bank Accounts on different dates. STT was duly deducted on each sale of shares and the transaction were through SEBI. As such the learned AO is wholly unjustified to hold the entire sale proceeds of shares as unexplained cash credit u/s.68 when,

(i) S.T.T. was duly paid on Transfer of shares; and (ii) Holding of such shares was for more than one year.

The AO found that the above sale proceeds were made only to avoid tax which is totally unjustified and unlawful. The AO's action was made on surmises and suspicion and the assessment as made was without any proper basis. The fact was not considered by the AO and nor the Ld. CIT(A). The addition under the head capital gains as made by the AO and sustained by the CIT(A) is arbitrary, unlawful, unjustified and the same should be deleted in the interest of justice.

9 ITA No.507/CTK/2024

Prayer: The appellant request your honour to kindly consider the fact. The appellant shall ever pray.

available on record. As from the facts emerges of the present case, it is

not a solitary transaction carried out by the assessee of purchase and

sale of share of a company from which it had earned any unreasonable

or excessive profits. From the history of the assessee’s case it appears

that the assessee is regularly transacted in shares and regularly declaring

income on account of long term capital gain and short term capital gain

from the sale of shares in preceding years also. In preceding years the

department had also alleged that the assessee is engaged in obtaining

bogus LTCG by sale of shares of various different company, however,

such allegation was found incorrect by this Bench of the Tribunal and

when a question was raised by the Bench before the ld. AR as to whether

such orders of the ITAT were challenged by the revenue before the

Hon’ble High Court of Orissa, it was replied by the ld. AR that the

department has not preferred any further appeal against such orders,

thus, the said order of this Bench of the Tribunal became final.

discharged its burden of establishing that the shares were purchased by it

by making payments through banking channels and necessary evidences

of purchase bills and demat account where the shares was credited to the

account of the assessee, were duly filed. Further the assessee has filed

10 ITA No.507/CTK/2024

the contract notes of the stock exchange when the shares were sold after

holding them for a period of more than one year and due STT was paid at

the time of making sales and consideration was also received through

banking channel. All these evidences have not been controveted by the

lower authorities, who simply proceeded on whims and fancies and

neither any contrary material nor any investigation was carried out or

other material was brought on record by making independent enquiries to

hold that the assessee has obtained any bogus LTCG from the sale of

shares.

Appu Marketing Manufacturing Ltd. (now known as Ejecta Marketing

Limited), it is seen that nowhere in that order it was alleged by the SEBI

that the company was engaged in such kind of activity of manipulating its

shares to facilate anybody in making long term capital gain. The penalty

was levied for unfair trade practice of reversal trades involved in squaring

off transaction. This has no relationship with the transaction of purchases

and sales carried out by the assessee in the shares of M/s Appu

Marketing Manufacturing Ltd. (now known as Ejecta Marketing Limited).

Moreover, nowhere in the assessment order it has been alleged by the

AO that the trading done by the assessee was in illiquid stock option at

BSE nor the assessee was ever been confronted by the SEBI with regard

to the said transaction of purchase and sales of shares. From the perusal

of bills and contract notes submitted before us, we find that the shares

were sold on different dates in different quantities in the stock exchange

11 ITA No.507/CTK/2024

and none of the transaction was in the nature of reversal trade of squaring

off transaction with significant difference in the sales value and buy value

of the transactions. We are also live to the issue that in the case of the

assessee himself in the preceding assessment years this Bench of the

Tribunal vide its order dated 30.05.2022 in ITA No.303/CTK/2019 (AY:

2015-2016) and ITA No.31/CTK/2020 (AY: 2014-2015) and in CO

No.04/CTK/2020) (AY : 2014-2015) has held that the transaction of capital

gains earned from the shares and claimed as exemption u/s.10(38) of the

Act is genuine transaction. The relevant observations of this Bench in the

aforesaid case as contained in para 8 of the order are reproduced herein

below :-

12 ITA No.507/CTK/2024

because he has not claimed it nor just because agreed not to claim it. An exemption otherwise is allowable to the assessee cannot be even surrendered by an assessee. What is due to the assessee, it is the duty of the Income Tax Officer to grant to the assessee. An Income Tax Officer is not just revenue collector, he is known as Assessing Officer. He is to accesses the correct income and brings to tax the correct income. It is his duty of assessing the correct income after granting the benefit due to an assessee. For repetition sake, the Income Tax Officer is known as Assessing Authority not a Taxing Authority. 11. Further the observation of the revenue that the assessee has failed

to establish the source of contribution made in the capital of partnership

firm has also been dealt with by the Tribunal in the case of partnership

firm M/s Sonthalia Rice Mills, where this Bench of the Tribunal was of the

opinion that no addition could be made in the hands of the firm as the firm

has discharged its burden to prove the genuineness of the credits in its

hands and since in the case of assessee no addition was made on this

score it could not be held that the assessee has made investment in the

partnership firm out of his undisclosed sources. Thus, this argument of the

department that the assessee has introduced his undisclosed income in

the firm as capital contribution in the grab of bogus LTCG also hold no

water.

decided in favor of assessee with by the Hon’ble Jurisdictional High Court

in the case of Pr.CIT-1 Vs. Smt. Bimala Devi Singhania, passed in ITA

Nos.84&85 of 2022, dated 10.10.2023, wherein the Hon’ble High Court

after considering all the judgments on this issue, has dismissed the

appeal filed by the revenue. The relevant observations of the Hon’ble

High Court as contained in para 6 to 15 are reproduced hereunder:-

13 ITA No.507/CTK/2024

"I) Whether the learned Tribunal has rightly accepted the claim of the assessee as per law regarding exemption under Section 10 (38) with respect to alleged income under the head "Long Term Capital Gain" on sale of shares of penny stock by ignoring the admission by their group before the Income Tax Authority that complete tax would be paid on the bogus LTCG claimed by the group subsequent to survey operation under Section 133A?

II) Whether the learned Tribunal has rightly dismissed the appeal of the revenue with the observation that as the sale of shares were effected through recognized stock exchange and STT had been paid at the time of transfer, therefore it cannot be held as bogus?"

"Any income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund for a unit of a business trust where-

(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No.2) Act, 2004 comes into force; and (b) such transaction is chargeable to securities transaction tax under that Chapter;

[Provided that the income by way of long term capital gain of a company shall be taken into account in computing the book profit and income tax payable under section 115 JB;) [Provided also that nothing contained in sub-clause(b) shall apply to a transaction undertaken on a recognized stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency,

[Provided also that nothing contained in this clause shall apply to any income arising from the transfer of a long term capital asset, being an equity share in a company, if the transaction of acquisition, other than the acquisition notified by the Central Government in this behalf, of such equity share is entered into on or after the 1st day of October, 2004 and such transaction is not chargeable to securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004 (23 of 2004)"

14 ITA No.507/CTK/2024

15 ITA No.507/CTK/2024

empower any Income Tax Officer to examine on oath, as the assessment has to be made on the basis of materials and documentary evidence and not on a bare statement. Therefore, the substantial questions of law, as formulated, have no legs to stand. 12. It is worthwhile to mention here that, the Security Transaction Tax (STT) under Chapter-VII of Finance (No.2) Act, 2004 is a direct tax levied by Government of India on every purchase and sale of Hon ever recognized securities that are listed on the stock exchanges in India. The STT was implemented to curb the tax avoidance on capital gains, which is similar to Tax Collected at Source (TCS) to be collected by a recognized stock exchange and both the buyer and seller will pay the said tax, prescribed at for as carrying out the transaction of securities for financial gains, are liable to pay STT. All gains from such transactions are called capital gains and are classified as LTCG or STCG, depending on the holding period. Therefore, the alleged substantial questions of law as proposed by the Revenue cannot be sustained in the eye of law, as the same is contrary to clauses (a) and (b) of Section 10 (38) of the Income Tax Act, 1961 (Circular No.5/2005 dated 15.07.2005). 13. Mr. T.K. Satapathy, learned Senior Standing Counsel appearing for the Income Tax Department laid emphasis on the CBDT Circular No.23 of 2019 dated 06.09.2019, as the matter related to bogus Long Term Capital Gain on stock. But the said circular can only be applied prospectively not retrospectively, because the present appeal is for the Assessment Year 2013-14. Thereby, the circular relied upon by the Senior Counsel appearing for the revenue has no application to the present case. 14. In view of the facts and circumstances, as well as the law, as discussed above, even though substantial questions of law have been framed vide order dated 13.09.2023, the same are not required to be answered. As such, CIT (A) and Income Tax Appellate Tribunal, being the fact finding courts, relying upon the evidences available on record, having passed the orders impugned, there is no necessity of answering the substantial questions of law framed for adjudication. 15. Thus, both the appeals, being devoid of merits, are hereby dismissed. However, there shall be no order as to costs.

Hon’ble High Court has confirmed the order of the Tribunal by observing

as under:-

3.The impugned order of the ITAT has sufficiently dealt with the factual details concerning the Respondent-Assessee. The question was regarding the claim of long-term capital gains on shares in terms of Section 10(38) of the Act. During the course of scrutiny

16 ITA No.507/CTK/2024

assessment, a revised return was filed by the Assessee claiming the above exemption. After the AO rejected the plea, the Assessee went before the CIT(A). The CIT(A) was satisfied that the purchase of liquid shares have been made through Account Payee Cheques and the shares themselves were held in Demat Account for more than 12 months and then sold through the recognized stock exchange after payment of security transaction tax A reference was made to the CBDT circular which debarred the Revenue from obtaining admissions/statements during the course of a survey. The ITAT also noted the settled position in law that if an Assessee has wrongly offered an item of income or omitted to make a claim of deduction in the return, he was entitled to correct such request to the AO to that effect a mistake by making a 4. Another ground on which the ITAT found fault with the additions made by the AO was that reliance was placed on statement of 'so called entry operator' to justify the additions under Sections 68 and 69 of the IT Act. These statements were recorded on various dates in some other proceedings not connected with the Assessee. Further, the statements were recorded much before the date of the survey conducted on the Assessee. It was unable to be disputed by the Department that the Assessee did not have an opportunity to challenge such statements and further, no opportunity to cross- examine the so-called entry providers was given to the Assessee. 5. Having heard learned Senior Standing Counsel for the Department (Appellant) and having perused the impugned orders of the AO, CIT(A) and the ITAT, the Court finds that both the grounds viz., the claim for benefit of Section 10(38) of the Act and denial of an opportunity to cross examine the entry providers, turned on facts. The ITAT was justified in accepting the plea of the Assessee that the failure to adhere the principles of natural justice went to the root of the matter. Also, the CBDT circular that permitted to the Assessee to file revised returns if he omitted to make a claim was also not noticed by the AO. 6. In the considered view the Court, the ITAT committed no error in concurring with the view of the CIT(A) and in dismissing the with the Revenue's appeal. No substantial question of law arises from the impugned order of the ITAT that calls for interference by this Court. The appeal is accordingly dismissed.

Mohapatra, stood confirmed by the Hon’ble Supreme Court in the SLP

(Civil) Diary No(s).5269/2024, vide order dated 04.03.2024 by dismissing

the SLP filed by the revenue.

17 ITA No.507/CTK/2024

Ramesh Rikhavdasdas Shah, HUF in ITA No 3545/Mum/23 and

3546/Mum/23 vide an order dated 25.07.2024 has decided the issue in

favor of the assessee. The observation of Hon’ble Bench is as under:-

8.We heard the parties and perused the record. We notice that the assessing officer 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 gains reported by the assessee in both the years is bogus in nature. We notice that the investigation report prepared by Investigation wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of prices. The Ld A.R submitted that the transactions carried on by the assessee were not subjected to scrutiny by SEBI at all. 9. We notice that the assessee has purchased the shares from Stock exchange platform and also sold the shares in the stock exchange platform. Both the transactions have been carried out at the prevailing market rates only. The assessee has furnished evidences to prove the factum of purchase and sale of shares. The financial transactions have also been carried out through banking channels. The shares have entered into and exited from Demat account of the assessee. We notice that the AO did not find any fault with the documents so furnished by the assessee. Under these set of facts, we are of the view that the decision rendered by Hon‟ble Bombay High Court in the case of Indravadan Jain (HUF) (supra) will squarely apply to the facts of the present case. In the above said case, the Hon‟ble Bombay High Court held as under:- “….The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkatta Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent’s bank account has been debited. The shares were also transferred into respondent‟s Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkatta Stock Exchange. Pursuant to sale of shares the said 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.” Accordingly, we are of the view that there is no reason to suspect the transactions of purchase and sale of shares of above said company declared by

18 ITA No.507/CTK/2024

the assessee in both the years under consideration. Accordingly, the estimated commission expenses added by the AO to the total income of both the years are also liable to be deleted. 10. Accordingly, we set aside the orders passed by Ld CIT(A) in both the years on the above said two issues and direct the AO to delete the addition of sale consideration of shares and also estimated commission expenses made by him in both the years. 11. In the result, both the appeals filed by the assessee are allowed.” 16. In view of the above facts and after considering the decisions of this

Bench of the Tribunal and the judgments of the Hon’ble Jurisdictional

High Court and of the Hon’ble Supreme Court, referred to above, we find

that in the present case the assessee has established the genuineness of

the transaction by placing on record all the plausible evidence in the

shape of purchase bills and sales bills, demat account statement etc.

which remained uncontroverted. Moreover, no material was brought on

record by the revenue to hold that such transaction of sale of shares is

bogus and merely by relying upon the judgment of the SEBI delivered in

some other context, it was alleged that the transaction of the sale of

shares in the company M/s. Appu Marketing Manufacturing Ltd. (now

known as Ejecta Marketing Ltd. is a bogus transaction, cannot be

accepted. The exemption u/s.10(38) of the Act is available to an assessee

if all the conditions as provided are meet out. As observed above, all such

criteria are fully satisfied by the assessee and due STT was also paid at

the time of sale of shares. Under these circumstances, we are of the

considered view that the transaction of sale of shares of M/s. Appu

Marketing Manufacturing Ltd. (now known as Ejecta Marketing Ltd.),

cannot be held as a bogus transaction and the LTCG earned out of the

sale of shares of this company amounting to Rs.65,55,972/- is held as

19 ITA No.507/CTK/2024

genuine LTCG earned by the assessee from a genuine transaction. Once

the transaction is held as genuine transaction and the LTCG earned out of

such transaction is held as genuine and assessee also fulfilled all the

criteria to claim exemption u/s.10(38) of the Act, therefore, we allow the

exemption on such LTCG u/s.10(38) of the Act. In view of the above

discussion, the addition of Rs.65,55,972/- as upheld by the ld. CIT(A) is

hereby deleted. Thus, the grounds of appeal of the assessee are allowed.

Order pronounced in the open court on 13/12/2024.

Sd/- Sd/- (GEORGE MATHAN) (MANISH AGARWAL) लेखा सद�य/ ACCOUNTANT MEMBER �याियक �याियक सद�य �याियक �याियक सद�य सद�य / JUDICIAL MEMBER सद�य कटक कटक Cuttack; �दनांक Dated 13/12/2024 कटक कटक Prakash Kumar Mishra, Sr.P.S. आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant- Ashwin Kumar Agarwal Plot No 1554/B, Sector-6 B/H DAV Public School, Abhinab Bidanasi 753014, ��यथ� / The Respondent- 2. DCIT ,ASMNT Circle -2(1), Cuttack आयकर आयु�(अपील) / The CIT(A), 3. आयकर आयु� / CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, कटक कटक कटक / DR, ITAT, कटक 5. Cuttack गाड� फाईल / Guard file. 6. स�यािपत �ित //True Copy// आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार

(Assistant Registrar) आयकर अपीलीय अिधकरण, कटक/ITAT, Cuttack