SINDHUMATI RAMAVTAR PATHAK,BORIVALI MUMBAI vs. ASST COMMISSIONER OF INCOME TAX 32 3 MUMBAI PRESENTLY DY C I T CIRCLE 42 3 1 MUMBAI, MUMBAI

(i) Transactions of shares were not governed by market factors prevalent at relevant time of such trade, but same were product of design and mutual connivance on part of the Assessee and the operator. (ii) The Assessee resorted to a preconceived scheme to procure long term capital gains by way of price difference in share transactions not supported by market factor.

3 Sindhumati Ramavtar Pathak (iii) Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bonafide and hence impugned long term capital gain is not allowable. (iv) The Assessee failed to discharge his onus. (v) Ignorance of the Assessee about shares and penny stock companies. (vi) Mode of acquisition of shares. (vii) Sale of shares and unusual rise in the price. (viii) The Assessee failed to discharge his onus. (ix) Ignorance of the Assessee about shares and penny stock companies. (x) Financial analysis of the penny stock companies. (xi) Analysis of transaction and end finding of the investigation wing.

4. The Assessee being aggrieved, challenged the said addition by filling first appeal before the Ld. Commissioner, who though affirmed the addition of Rs. 13,445,414/- under section 68 of the Act, however, deleted addition of Rs. 5,37,817/- made under section 69C made by the Assessing Officer, by partly allowing appeal of the assessee.

5. Thus, Assessee being aggrieved has preferred instant appeal.

6. Heard both parties and perused the record available on record. Admittedly, the assessee before the authorities below, has filed relevant documents and also claimed as under:

“1. The Appellant before Your Honours is a widow and senior citizen. The Appellant is a regular investor in shares and regularly offers Short Term Capital Gains and Long Term Capital Gains as well as Speculation Profit / Loss in her return of income. Page 4 - 7 of the paper book. 2. The Appellant during the year under consideration had claimed exemption under section 10(38) of the Act on sale of shares of Sunrise Asian Ltd. as under: -

4 Sindhumati Ramavtar Pathak i. Shares of Conart Trader's Ltd Purchased on 23.08.2011 - Page 6 of the PB ii. Purchase consideration paid through Cheque No. 977940 - Page No. 12 of PB iii. Shares allotted to the Appellant on 01.11.2011-Page 8-10 of PB iv. Conart Trader's Ltd merged with Sunrise Asian Ltd vide order dated 22.03.2013 passed by Hon'ble Bombay High Court - Page 13-18 of PB v. Shares credited in the Demat Account of the Appellant - Page 20 - 25 of PB vi. Shares of Sunrise Asian Ltd sold during the year under consideration - page 6 of PB vii. Contract Note of Sale of shares and payment of STT- Pages 26 - 65 of the PB viii. Sale transaction was subject to Security Transaction Tax ix. Sale consideration received directly in her bank account. x. Part of shares is still in possession of the Appellant - Page 5 of the PB 3. The Appellant being a regular investor in shares has also provided detailed share holdings of shares and also shares sold during the year along with the capital gains working during the year. [Please refer to page no 6-7 of paper book.] 4. The Appellant has held the shares for more than 30 months and therefore, the shares sold by her is genuine. Hence, the disallowance of claim of 10(38) of the Act with respect to the Long Term Capital Gains earned on sale of shares of Sunrise Asian is not justified. (i) Jayesh Sojpar Karnia HUF Vs. Income Tax Officer-Ward 30(1)(5) (ITA No. 4034/Mum/2023 dated 01.05.2025, Mumbai Tribunal) (ii) Smt. Hema Ramesh Jain Vs. Income Tax Officer [2024] 162 taxmann.com 440 (Mumbai -Trib) (iii) Sanjaykumar Damjibhai Gangani Vs. Assistant Commissioner of Income Tax, (OSD). (2024) 161 taxmann.com 606 (Surat Tribunal) (iv) Pr. CIT Vs. Sanjaykumar Damjibhai Gangani (2025) 178 taxmann.com 276(Gujarat) (v) Pr. CIT Vs. Vinod Premjibhai Gangani (2025) 178 taxmann.com 269 (Gujarat) (vi) Pr. CIT Vs. Divyaben Prafulchandra Parmar (2024) 169 taxmann.com 473 (Gujarat) (vii) Chief Commissioner of Income Tax (OSD) Vs. Nilesh Jain (HUF) (2024) 163 taxmann.com 229(Madhya Pradesh) (viii) Pr. CIT Vs. Ritu Agarwal Shreeram (2023) 453 ITR 520 (Rajasthan) 5. There is no allegation of manipulation against the SEBI or department. Hence, Long Term Capital Gains cannot be treated as non genuine, (i) Pr. CIT vs. Indravadan Jain HUF [2023] 156 taaxmann.com 605 (Bom)

5 Sindhumati Ramavtar Pathak (ii) Bhavin Vaghasia vs. ITO [ITA 2584/Mum/2018, order dated 16.06.2023 7. The assessee before us has claimed that part of shares is still in possession of the assessee and the assessee being a regular investor in shares has also provided details of shareholding of the shares and shares sold during the year alongwith the capital gains working during the assessment year under consideration. Further the assessee held shares for more than 30 months and sold through online platform of stock exchange and no allegation qua manipulation/rigging has ever been levelled or proved against the Assessee, by any of the investigation agencies, including of SEBI or Revenue-Department. Thus, the addition made by the Assessing Officer and affirmed by the Ld. Commissioner, is liable to be deleted.

6 Sindhumati Ramavtar Pathak Subsequently, the Assessee got dematerialized the said shares on dated 11.11.2013 and sold 5120 shares through online platform i.e. Bombay Stock Exchange on a total consideration of Rs.25,15,320/- from 14th March to 25th March 2014 and consequently earned the long term capital gain of Rs.24,04,115/- and claimed the same as exempt u/s 10(38) of the Act. The Assessing Officer (AO), by considering the investigation carried out by Directorate of Investigation, Kolkata and the mode of acquisition of the shares by the Assessee and unusual rise in the prices of share, findings of the investigation wing at Mumbai, analysis of transactions, failure of the Assessee to discharge his onus, ignorance of the Assessee about shares and penny stock companies, financial analysis of the penny stock companies, formality statement of Mr. V.V. Bhat and the modus operandi of arranged transactions, ultimately disallowed the claim of the Assessee and made the additions of Rs. 25,15,320/- u/s 68 of the Act and Rs.1,00,613/- being commission @ 4% of Rs.25,15,320/- as unexplained expenditure u/s 69C of the Act.

3. The Assessee, being aggrieved, challenged the said additions before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner more or less on the same reasoning of the AO, affirmed the aforesaid additions by dismissing the appeal of the Assessee.

7 Sindhumati Ramavtar Pathak “7. We further observe that Hon’ble Gujarat High Court in PCIT-1 Vs Divyaben Prafulchandra Parmar {R/TAX Appeal no. 812 of 2023 decided on 02-01-2024} (Citation 2024(1) TMI 800) has also dealt with same scrip i.e. M/s. Sunrise Asian Limited as involved in this case and ultimately affirmed the decision of the Hon’ble Tribunal in deletion of the identical addition, by observing and holding as under: [13] Feeling aggrieved by the order passed by the Tribunal, the appellant - Revenue has preferred this Tax Appeal on the proposed substantial questions of law narrated hereinabove. [14] Learned Senior Standing Counsel Mr. Karan Sanghani for the appellant reiterated the submissions made before the Tribunal and submitted that the Assessing Officer, after analyzing the data made available from the Bombay Stock Exchange, came to the conclusion that the price of script, which the assessee sold, was fluctuating by 24 times and after sale of shares made by the assessee, the price has reduced to Rs.0.49. It was, therefore, submitted that the Assessing Officer, taking into consideration the volatility of the share price of the script sold by the assessee, was justified in relying upon the report of the Investigation Wing of Kolkata as well as the fact that the SEBI has suspended the transaction of the said script for some time and accordingly, the Assessing Officer was justified in making addition of unaccounted income of the assessee on the ground of accommodation entries availed by the assessee. [15] It was further submitted that the CIT(A), after considering the documents available on record, has upheld the view taken by the Assessing Officer. It was submitted that the Tribunal, after considering the submissions made by the assessee and the Departmental Representative, allowed the appeal. It was submitted that the Tribunal, therefore, contrary to the facts and evidence on record, has allowed the appeal without considering the findings of the Assessing Officer and the CIT(A) in its true perspective. [16] Considering the contentions raised on behalf of the Revenue, the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non-genuine transaction 8 Sindhumati Ramavtar Pathak by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under: "5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span”.

8. The Tribunal in the case of Haresh Dilip Vora Vs. ITO Ward 25(2){4} Mumbai {ITA no. 3646/M/2024 decided on 10.9.2024} has also dealt with identical scrip and while following aforesaid judgments, ultimately deleted the identical addition, as involved in this case, by observing and holding as under: 7.2. The ld. CIT(A) in impugned appeal order respectfully relied on the order of Hon'ble Calcutta High Court in the case of CIT Vs Swati Bajaj[2022] 446 ITR 56 (Calcutta) where on same set of facts related taxability of LTCG on sale of shares considered as manipulated penny stock &

9 Sindhumati Ramavtar Pathak the action of the ld. AO is confirmed. But the related to scrip "Sunrise Asian Ltd" the assessee is covered by the order of the Hon'ble Gujrat High Court. Accordingly, the same would prevail on the issue before this Bench. In the present case, the decision of the Hon'ble NonJurisdictional High Court carries only an influence. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble Non- Jurisdictional High Court. Considering the impugned assessment order, the ld. AO has not provided any evidence even worth a name that Assessee’s own money has been routed back to him. There is no nexus with the Assessee with price rigging and no adverse observation from stock exchange. The addition simply on third party statement is uncalled for. We respectfully relied on the order of Hon'ble Supreme Court in PCIT vs Smt. Renu Aggarwal [2023] 456 ITR 249 (SC). We respectfully rely on the orders of the Hon'ble Apex Court, Jurisdictional High Court and Coordinate Bench of ITAT Mumbai which has similar in the factual matrix with the impugned issue. The grounds of appeal of the assessee are upheld. We set aside the impugned appeal order. The additions amount to Rs. Rs.47,51,164/- U/s 68 of the Act and amount to Rs. 50,061/- U/s 69C are quashed.

9. As we observed above that the Assessee purchased the share through banking channel and held the same for around 17 months and sold the same through online platform and banking channel. The Assessee by filling relevant documents such as purchase bills of shares, bank account statement, DP statement and some broker notes in order to establish his claim of LTCG, has discharged primafacie onus cast u/s 68 of the Act. Further, the AO had no base or foundation/corroboration to make the addition in the hands of the Assessee but he simply relied on the investigation report of the Kolkata Directorate and the SEBI report and usual rise in the price, in which the Assessee has not played any role and it is a fact that no action has ever been taken by the SEBI or any investigation agency against the Assessee herein and therefore it goes to show that the AO made the additions under consideration simply, on the conjecture and surmises, and therefore the additions in view of the above facts and circumstances and decisions, are not sustainable, thus the same are deleted.

10 Sindhumati Ramavtar Pathak 6. As the Assessee has been able to discharge his prima-facie onus cast u/s 68 of the Act and the Revenue Department has not rebutted the documents and/or claim of the Assessee by producing any corroborating material concerning directly and therefore respectfully following the judgment of the Co-ordinate Bench of the Tribunal in the aforesaid case and the judgment of the Hon’ble Gujarat High Court, wherein the identical scrip was involved, this Court is inclined to delete the addition of Rs.25,15,320/- u/s 68 of the Act.

7. As the substantive addition has been deleted and therefore the addition of Rs. 1,00,613/- being commission @ 4% of Rs.25,15,320/- made on account of commission made u/s 69C of the Act also collapsed, consequently, the same is also deleted.”

11 Sindhumati Ramavtar Pathak

Order pronounced in the open Court on 24/12/2025.