ITO WARD - 28(4), NEW DELHI vs. RENU GUPTA, NEW DELHI

Shri Sanjeev Kapoor appearing on behalf of the assessee submitted at the outset that the issue raised in present appeal by the Revenue is squarely covered by the decision of Coordinate Bench of the Tribunal in for AY 2015-16 titled ITO vs. Shivani Gupta, decided on 06.04.2021. The ld. AR contended that in identical set of facts where the assessee in aforesaid appeal had sold shares of Eins Eductech Ltd. on Bombay Stock Exchange (BSE) and had paid STT, claimed Long Term Capital Gain on sale of said shares as exempt u/s. 10(38) of the Act. The assessee’s claim of exemption u/s. 10(38) of the Act was rejected by the AO, on the ground that the transaction is sham. The assessee (AY 2015-16) challenged the addition before CIT(A). The CIT(A) allowed assessee’s appeal. The Revenue carried the issue in further appeal before the Tribunal in ITA No. 5204/Del/2019. The Tribunal vide order dated 06.04.2021 confirmed the order of CIT(A) and dismissed appeal of the Revenue. The reasons given by the AO for rejecting assessee’s claim of exemption u/s. 10(38) of the Act and the scrip on which the assessee has earned Long Term Capital Gain is identical and the reasons recorded by AO for rejecting assessee’s claim of exemption is also similar. Thus, the decision rendered in the case of Shivani Gupta (supra) fully applies to the facts of the present case.

Per contra, Ms. Harpreet Kaur Hansra representing the department vehemently defended the assessment order and prayed for reversing findings of the CIT(A). The ld. DR submits that the assessee has indulged in obtaining bogus Long Term Capital Gain on sale of shares, which is a declared penny stocks. The AO in detail has explained modus operandiof operators, intermediaries and beneficiaries involved in generating bogus LTCG/STCL on penny stock. She further referred to investigation report of Kolkata Investigation Directorate, wherein, 84 penny stocks were identified including the shares of Eins Eductech Ltd.

Both sides heard, orders of the authorities below examined. The Revenue is in appeal before the Tribunal against findings of the First Appellate Authority in deleting addition of Rs.1,30,83,424/- alleged to be bogus LTCG entry provided by operator to the assessee. The undisputed facts are, the assessee had acquired 1,50,000 shares of M/s. Eins Edutech Ltd. in July 2013 through preferential allotment @Rs.15/- per share. The shares were credited in demat account of the assessee on 25.11.2013. Out of these shares, the assessee sold 23500 shares during the period relevant to assessment year under appeal for a total (AY 2015-16) consideration of Rs.1,30,83,424/-. The shares were sold through brokers on Bombay Stock Exchange and STT was paid. The assessee earned LTCG of Rs.1,26,30,352/- on sale of said shares. The AO merely on the basis of a investigation report from Kolkata Directorate held the LTCG as bogus and disallowed the entire claim of assessee u/s.10(38) of the Act. There is no allegation by the AO that the brokers through whom assessee had sold shares are tainted and were in any manner involved in providing bogus entries or their linkage with dubious operators in any manner. No evidence is brought on record to show semblance in the transactions carried out by the assessee with the modus operandi discussed in the investigation report from Kolkata Directorate. For disallowing assessee’s claim u/s. 10(38) of the Act, the AO has recorded facts of assessee’s transaction and then discussed the report and modus operandi mentioned therein, without establishing the nexus between the two.

We find that the issue in appeal is identical to the one adjudicated by the Tribunal in the case of ITO vs. Shivani Gupta in (supra). The assessee in said case, as is in the present case had traded in shares of Eins Eductech Ltd. on BSE and had earned LTCG on sale of said shares and claimed the same as exempt u/s. 10(38) of the Act. For the identical reasons as is in the present case, the AO rejected assessee’s claim of exemption u/s. 10(38) of the Act. In First appeal, the CIT(A) deleted the addition. In further appeal by the Revenue, the Tribunal following the decision rendered in the case of Tapas Kumar Mallick vs ACIT in ITA No. 8142/Del/2018 for AY 2015-16, decided on 19.03.2021upheld the order of CIT(A). The Co-ordinate Bench while deciding the issue in appeal in turn placed reliance on the decision of Hon’ble Delhi High Court (AY 2015-16) in the case of PCIT vs. Krishna Devi & Ors., decided on 15.01.2021 concluded as under: “7.1. The issue is, therefore, covered by the aforesaid Order of the Tribunal in favour of the assessee wherein the Tribunal followed the Judgment of Hon’ble jurisdictional Delhi High Court and has deleted the entire addition. The Tribunal has considered almost similar circumstances and do not find any allegation against the assessee for earning bogus long term capital gains under section 10(38) of the I.T. Act, 1961. The initial onus upon the assessee to prove source of the money credited in the Bank account of the assessee has been discharged by producing the documentary evidences and material on record. The A.O. did not rebut the documentary evidences furnished by the assessee. Therefore, the Ld. CIT(A) on proper appreciation of facts and material on record correctly deleted the addition. We, therefore, do not find any infirmity in the Order of the Ld. CIT(A) in deleting the addition. In view of the above, appeal of the Department is dismissed.”

No contrary material was brought before the Bench by the Revenue. We find no infirmity in the impugned order. Hence, the same is upheld and appeal of the Revenue is dismissed being devoid of any merit.